Tether has the funds to convert all USDT into USD according to bank statements seen by Bloomberg which claims the veracity of these USD funds has been confirmed by an unnamed government official.
How Bloomberg got hold of these documents is not clear, but they say Tether had $2.2 billion at Noble Bank Ltd. on Jan. 31 2018. That same day, 2.195 billion Tethers existed. They further add:
“Each time a Tether is issued or redeemed, it’s publicly recorded on the Omni layer of the Bitcoin blockchain. These transactions were required by Noble as justification for moving money between the Tether and Bitfinex accounts, the people said.
That created an audit trail that was presented to the CFTC once the subpoenas were issued, they said. Regulators spent about six months digging through the transactions, they said.”
Tether has been subject to much criticism and some investigations by the Commodities Futures Trading Commission (CFTC) and the US Department of Justice.
It may be that one of these investigators leaked the results to Bloomberg, presumably to reassure the public. Or of course it may be that Noble Bank or Bitfinex did so in light of the investigations.
The authenticity of the documents has however been verified by a government official according to Bloomberg, so it may well be that tether is actually legit tokenized dollars.
That would be quite a revelation to many, and questions still do remain, but if tether is indeed fully backed, then it may alleviate many concerns.
Tether was open to the public to buy and sell according to Bloomberg, but following a banking blockade that was seemingly aimed at enforcing a CFTC fine on Bitfinex due to the exchange providing unregulated margins, the buying and selling of Tether was limited to only Bitfinex.
That means individuals send dollars to the exchange and then convert them to USDT or vice versa. Withdrawing dollars from Bitfinex, however, courts significant delays due to their banking problems.
If this is indeed legitimate, then the business can be quite lucrative with Tether earning $6.6 million in interest for 2018.
The tokenized dollar does further add efficiency to crypto markets, especially in arbitrage and especially where it concerns foreign exchanges which might not easily be able to handle fiat dollars.
Tether thus has risen to occupy the 6th position in the crypto market at the time of writing, but a number of alternatives to it have launched, including one by Coinbase which does the same thing, but they claim in a regulated way.
That tokenized Coinbase dollar, USDC, has a current market cap of $214 million with individuals able to convert their dollars into USDC and vice versa on Coinbase.
Then there’s DAI which operates somewhat differently to achieve the same tokenized dollars results. Dai runs on ethereum smart contracts with it created by putting eth down as collateral.
That means unlike Tether or USDC, Dai doesn’t have the same level of counterparty risks, including say the bank going under. On the other hand, one little bug and dai can be in trouble.
Dai has been running for precisely one year now without any bugs or any problems, but as it is all running code it has to grow somewhat slowly to increase confidence and trust in the system.
Tether, on the other hand, runs on a centralized system where transactions can be reversed while USDC runs on eth smart contracts but their code allows for the reversal and/or the freezing of transactions.
That allows them to grow much quicker, with crypto start-ups in effect beating central banks and commercial banks in their announced attempts/aims to launch tokenized fiat.
Still, it remains just the dollar for now, with the euro, yen or pound awaiting its tokenization. It is not clear how much demand there is for these tokenized currencies, but one year to describe 2018, especially now that tether appears to be legitimate, would be as the year of the stablecoins.