Tether Admits that a Certain Portion of its Reserve are Kept in Bitcoin

By Prashant Jha

Tether has been in the news lately for the Bitfinex debacle, where Bitfinex was accused of manipulating its financial records by covering losses worth $850 million with the USDT reserve. After the news broke out, many unsettling discovering has come in the light of the public domain. First, it was revealed that only 70 percent of the USDT token is backed by the US dollar, against the prior claims that each USDT is backed by one dollar. Now during the court proceedings in the investigation, Tether has also admitted that a certain portion of its reserves is backed by Bitcoin as well.

The admission came with the court documents of the ongoing proceeding. David Miller, an attorney for Bitfinex revealed,

“Prior to the April 24th order … Tether actually did invest in instruments beyond cash and cash equivalents, including bitcoin, they bought bitcoin.”

The revelation might cause more trouble for the stable coin and its market value as the organization has kept its consumers in dark for so long. It might also attract potential lawsuit, given how Tether has manipulated the market to garner such attention and market value. The sole purpose of a stable coin is to maintain a stable value irrespective of the market condition, but that is only possible because it was thought to be backed by US dollar, and not something as volatile as Bitcoin.

Joel M. Cohen, the New York Supreme Court judge noted the irregularities in the information that Tether has put in the public domain saying,

“Tether sounded to me as sort of the calm in the storm of cryptocurrency trading. And so if Tether is backed by bitcoin, how is that consistent? If some of your assets are in a volatile currency that Tether is supposed to somehow modulate, that seems like it’s playing into what they are saying.”

Tether has also changed the wordings of its user policy prior to the lawsuit. The information that said all of the USDT is backed by fiat was changed to not all the reserves are backed by fiat. Looking at the number of lies that have been unrevealed in recent times, it would be a surprise if Tether is able to get back to business anytime soon.