Tether is back in the headlines after the company updated its terms and conditions to suggest its dollar-pegged digital currency may not be 100% backed by traditional currencies — a claim it had repeatedly stood by in the past.
In a statement on its website, Tether said its coin, known as USDT, is backed by reserves that “may include other assets.”
“Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, ‘reserves’). Every tether is also 1-to-1 pegged to the dollar, so 1 USD₮ is always valued by Tether at 1 USD,” the company’s website says.
Tether had previously stated: “Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD.” Tether played down the change, saying it’s part of its effort to update transparency and reflects the continued growth of the stablecoin.
“From time to time, Tether reviews its Terms of Service and Risk Disclosures to ensure that they remain appropriate and up to date,” said Kasper Rasmussen, head of marketing at Bitfinex in an email to MarketWatch. “Our most recent revisions were intended to update our disclosures to reflect Tether’s growth and operations and to be consistent with the types of disclosures used by other institutions.” Bitfinex and Tether share common investors and management.
A stablecoin is a cryptocurrency that is pegged to a specific asset — usually a fiat currency — and are aimed at users seeking less volatility than that often experienced by other digital currencies.
Critics have long expressed doubt about whether Tether’s currency was fully backed by traditional currencies. Not surprisingly, Tether critics are demanding answers. “This is a very concerning update by Tether, I think the community is owed an official statement from the Tether team,” cryptocurrency analyst Joseph Young said in a tweet.
This is a very concerning update by Tether, I think the community is owned an official statement from the Tether team pic.twitter.com/b6TxbNF8Sz— Joseph Young (@iamjosephyoung) March 14, 2019
Kara Haas, a CPA focused on blockchain technology and crypto assets said the change raises more red flags. “This has so many implications,” she said. “They’re saying they can break that out into whatever they want. They could have a receivable on their book that owes them some money from another exchange and count that as an asset against their own Tether.”
However, Rasmussen reiterated to MarketWatch that there should be no concern about the security and stability of its cryptocurrency. “Tethers remain completely stable and 100% backed so Tether’s reserves always equal or exceed the number of issued Tethers,” he said.
“The only change is that the composition of the assets that provide that backing includes a combination of cash, cash equivalents, and may also include other assets or receivables from loans issued by Tether.”
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