The biggest dollar-pegged stablecoin on the market, Tether (USDT), is only for 74 percent back by actual money, or equivalents. That was stated by the general counsel of Tether Ltd to the Supreme Court of the State of New York. The company has short term securities on hand totaling approximately 2.1 billion dollars.
Currently the circulating market supply of Tether exceeds $2.8 billion dollars. The company changed its website months ago, to let people know that its USDT token is not fully backed by dollars. The company never outed what kind of commodities it did use to back the token. Even though Tether has outstanding loans, these are not part of ‘missing’ 26 percent. According to Zoe Philips, a lawyer from Morgan Lewis, there’s nothing that’s actually backing those tokens.
If Bitfinex would be a classic bank, it’s actually quite impressive that it has $2.1 billion on hand. If everybody would cash-out at the same time, Bitfinex would get in trouble of course. However, that’s nothing different from the traditional banking system. Over the past couple of years we’ve seen plenty of cases where people want to cash out but couldn’t. That doesn’t mean it’s a good thing, because it’s obviously not in the consumer’s or investor’s best interest.
The current problems for Tether started late last year. Late April another chapter was added to that page, when iFinex got into trouble. The mother company of both crypto exchange Bitfinex and stablecoin Tether had transferred 850 million dollars from Tether to Bitfinex in order to cover up a loss. Yet, they claim to have done this with the best intentions to protect the crypto community., because problems at Bitfinex could’ve negatively impacted the price of bitcoin and USDT.
Also published on Medium.