Tether has Enough US Dollars to Back Tokens

By Kapil Gauhar

According to a report published in Bloomberg on 20th June 2018, it is confirmed that digital currency from Tether is supported by the adequate amount of dollar holdings, which has been a long-contested assertion from the company. In an interview, Stuart Hoegner, General counsel of Tether, stated that Freeh Sporkin & Sullivan LLP, which is a law firm, accessed two bank accounts of Tethers for weeks and on June 1 released the number of dollar holdings in the account. He added that though this was not an official audit, the law firm was in contact with company executives, employees and had access to bank statements of the said accounts but refused to divulge the name of the bank accounts.

Co-founded by former Louis Freeh, former Director FBI, Freeh Sporkin & Sullivan LLP released a statement on 1 June 2018 saying that:

“FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles […] FSS has assumed, without further inquiry, that the bank personnel providing the confirmations were duly authorized to provide such confirmations, and that the confirmations were correct.”

As per Stuart Hoegner that till 1 June 2018, USDT worth @2.54 billion has been issued and data shows that at present there is appx. 2.8 billion USDT in circulation. In reply to questions that why an audit was not conducted, he replied that large accountancy firms are unwilling to work with clients dealing in cryptocurrencies and added “The bottom line is an audit cannot be obtained […] The big four firms are anathema to that level of risk. We’ve gone for what we think is the next best thing.”

Tether faced scrutiny from the crypto community due to ending their association with an auditor, right before the official audit was released. But in the month of February, a study from Bitmex research indicated that it is possible that Tether has enough cash reserves to match its token issue, in a Puerto Rican bank.

When Tether minted another 250 million USDT, it again rekindled the issue of their dollar reserves. Then a study by the University of Texas, published on the month of June, blamed Tether and Bitfinex, a crypto exchange, for manipulation of prices of Bitcoin in the year 2017 as the prices of Bitcoin rose to $20,000 in December 2017.

But the CEO of Tether, J.L. Van Der Velde denied the allegations in an interview to Bloomberg and said that:

 “Despite speculation, we have consistently stated that Tether is backed by USD reserves at or exceeding the Tethers in circulation at a given moment, and we’re glad to have independent verification of this to answer some of the questions posed by the public.”

It is estimated that the said price manipulation by Tether, brought the prices of Bitcoin Futures by almost 55% this week.