Stablecoin Tether refutes claims it isn’t tied to the US dollar
Tether, the world’s most popular ‘stablecoin’, has denied accusations that it is not backed by the number of US dollars that it claims.
The stablecoin is a new breed of cryptocurrency that is backed by a hard or ‘fiat’ currency, such as the dollar.
The aim is to reduce volatility and increase credibility by grounding the digital currency with something whose value is already a given.
Tether is one of the biggest stablecoins, but rumours had been circulating that it wasn’t all it claimed to be.
Now Tether has released a statement saying categorically that “all Tethers in circulation are fully backed by USD reserves. Full stop. Memoranda, consulting reports, industry leaders, cryptocurrency pioneers, and competitors have all confirmed this. Reserves have always, and will always, match the number of Tethers in circulation.”
The company said both Tether and Bitfinex – a cryptocurrency exchange closely linked to Tether, with some shared management – had “since day one, maintained strong, open relationships with banks, financial institutions, regulators, government agencies, and law enforcement”.
Tether told Bloomberg its bank deposits of $2.55bn were confirmed by law firm Freeh Sporkin & Sullivan, whom it had asked to perform a randomised check of the numbers of Tethers in circulation and the corresponding currency reserves.
The law firm did not conduct an official audit but had access to Tether’s accounts at two banks and released data on how much money the company held on a single day, June 1, Tether’s general counsel Stuart Hoegner said in an interview.
That amount is nearly equal to the value of all Tether digital coins in circulation that day, $2.54bn, say Tether executives.
‘Big four’ won’t do audit
Hoegner said none of the ‘big four’ accountancy firms were prepared to carry out an audit due to the nature of the crypto market.
“The big four firms are anathema to that level of risk,” he told Bloomberg. “We’ve gone for what we think is the next best thing.”
FSS is a Washington-based law firm established by three former federal judges – including former FBI director Louis Freeh.