Tether has just updated its website to clarify that each of its USDT tokens, which it claimed was "always backed by a traditional currency", is backed by assets other than the fiduciary currency.
Now, the website reassures its customers that it is still "100% backed by [its] reservations ". It clarifies this vague language, even legalistic, stating that "these reserves include traditional currency and cash equivalents and may, from time to time, include other assets and receivables from loans made by Tether to third parties, including including affiliated companies. entities. "
Despite the fact that some of Tether's guarantees may not be in fact, the revised notice ends in these terms: "Each Tether is also indexed to the US dollar, so 1 USD is always evaluated by Attached at 1 USD. "In the old version," 1 USD is still equivalent to 1 USD. "
Tether's statement that he attributes $ 1 to each of his chips is not the same as saying that each chip is supported by $ 1; the dollar value of each token is instead deducted from the valuation of its assets by Tether. This clarification will probably encourage Tether's most fervent opponents, who claimed that Tether was insolvent. Although it has never been proven that Tether does not have the necessary reserves to safeguard the coins in circulation, the company has systematically refused to submit to a formal audit, opting instead for attestations from a law firm in the past.
This update seems to at least lend credence to these insolvency issues, which have been scrutinized with the utmost thoroughness by researchers at the University of Texas at Austin, who published a report with a thesis that is based on the belief that Tether emissions have inflated the market in 2017 run. It should be noted that this report has been refuted by other academics who have challenged the faculty methodology.
Nevertheless, Tether claims that there is more than enough assets in its coffers to cover the circulating supply. On its transparency page, the company says it has $ 23 million more assets than liabilities.
"From time to time, Tether reviews its terms of service and its risk disclosures to ensure that they remain appropriate and up-to-date. Our latest revisions were to update our information to reflect Tether's growth and operations and to be consistent with the types of information used by other institutions, "said a member of the Bitfinex team at Bitcoin Magazine, on behalf of Tether.
"The only change is that the composition of the assets that provide this support includes a combination of cash, cash equivalents, and may also include other assets or receivables from loans issued by Tether," he said. they concluded.
With the language presented on the website and by this representative, Tether's assertion that its support may include "cash equivalents" and "other assets and receivables from loans made by Tether to third parties" reads as follows: as fractional reserve banking practices. This modern banking practice, which according to some has helped precipitate the 2008 financial crisis, allows banks to keep only a portion of their clients' deposits locally, preferring to lend the vast majority of these funds to institutions. and generate debt instead of physical assets. .
"The Fractional Reserve Bank is a banking system in which only a fraction of bank deposits are backed by available cash and can be withdrawn. This is done to develop the economy by releasing capital that can be loaned to other parties, "says Investopedia.
The fear of many Tether detractors is that the company is managing a fractional reserve, a concern that has been compounded by the apparent inability to redeem the USD through the Tether or Bitfinex website, an exchange run by the same company. direction than Tether. Tether's silver portal, however, would have been open since the end of 2018.
Since the most important market in the market is so opaque, the controversy surrounding Tether has created fertile ground for competition. Until 2017-2018, there has been a proliferation of cash-backed coins such as TrueUSD, Gemini USD, USD Coin and the Paxos standard, all of which are attempting to provide an institutional and regulatory alternative to the former. fixed market market.
To strengthen their credibility, the companies behind these coins used some of the largest accounting firms in the United States to audit their business and finances, which Tether's executives had qualified for. not previously possible, given the stigmatized nature of cryptocurrency companies. .