By definition, a fiat-backed stablecoin is supposed to be fully backed by the currency it is pegged to. Tether, which is the most popular of such coins in existence by consistent trading volume, has been accused of not fitting this mold, more than once.
Despite the fact that this is true, until today, it seemed nearly impossible to definitively prove just how stable the Tether Coin is without going inside the company to do so. This morning, CoinDesk released an article that suggests Tether is only 74% backed by cash reserves. Since the primary source for this claim is the group’s chief lawyer, it is definitely easy to argue that this is the case. The fact that he signed an affidavit on its’ veracity, seems to prove that it is.
If this is true, however, this means that Tether never was a stablecoin. As stated above, fiat-backed stablecoin should be equally pegged to cash reserves. To make matters worse, as today’s article reminds us, the New York Attorney General is still investigating both Tether and Bitfinex, which includes whether Bitfinex borrowed somewhere around $600 million from Tether to cover its’ alleged $850 million loss last year.
At the same time that all of this is going on, however, another one of Tether’s lawyers reportedly tried to argue that it does not need to hold 100% of its’ issuance in cash reserves. According to CoinDesk, however, the lawyer in question stopped short of giving a full explanation as to why this would be the case.
Since the NY AG’s investigation is still ongoing, none of this is for certain, except for the fact that Tether is not truly, completely stable. Those who are interested in reading the affidavit that proves this can find it here.
By: BGN Editorial Staff