Tether (cryptocurrency)

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Tether
Tether Logo.svg
Tether Logo
Denominations
Symbol ?
Ticker symbol USDT
Development
White paper Tether White Paper.pdf
Website tether.to
Block explorer Omniexplorer.info, Etherscan.io
Tether is a controversial[1] cryptocurrency with tokens issued by Tether Limited.
[2] It formerly claimed that each token was backed by one United States dollar, but
on 14 March 2019 changed the backing to include loans to affiliate companies.[3][4]
The Bitfinex exchange was accused[clarification needed] by the New York Attorney
General of using Tether's funds to cover up $850 million in funds missing since
mid-2018.[5][6]

Tether is called a stablecoin because it was originally designed to always be worth

$1.00, maintaining $1.00 in reserves for each tether issued.[7] Nevertheless,
Tether Limited states that owners of tethers have no contractual right, other legal
claims, or guarantee that tethers will be redeemed or exchanged for dollars.[4] On
30 April 2019 Tether Limited's lawyer claimed that each tether was backed by only
$0.74 in cash and cash equivalents.[8][9]

Tether Limited and the tether cryptocurrency are controversial because of the
company's alleged role in manipulating the price of bitcoin,[10] an unclear
relationship with the Bitfinex exchange, its apparent lack of a long-term banking
relationship,[11] and the company�s failure to provide a promised audit showing
adequate reserves backing the Tether token.[12][2] Author David Gerard was quoted
by the Wall Street Journal saying that Tether "is sort of the central bank of
crypto trading ... [yet] they don't conduct themselves like you'd expect a
responsible, sensible financial institution to do."[11] Tether's price decreased to
lows of $0.90 on 15 October 2018 on speculation that investors are losing faith in
the token.[13] On 20 November 2018, Bloomberg reported that U.S. federal
prosecutors are investigating whether Tether was used to manipulate the price of
bitcoin.[1] In 2019, Tether surpassed Bitcoin in trading volume with the highest
daily and monthly trading volume of any cryptocurrency on the market.[14]

Contents
1 History
2 Alleged price manipulation
3 Security and liquidity
4 Questions about dollar reserves
5 References
6 External links
History
Beginning with a whitepaper published online in January 2012, J.R. Willett
described the possibility of building new currencies on top of the Bitcoin
Protocol.[15] Willett went on to help implement this idea in the cryptocurrency
Mastercoin, which had an associated Mastercoin Foundation (later renamed the Omni
Foundation[citation needed]) to promote the use of this new "second layer".[16] The
Mastercoin protocol would become the technological foundation of the Tether
cryptocurrency, and one of the original members of Mastercoin Foundation, Brock
Pierce, would become a co-founder of Tether. Another Tether founder, Craig Sellars,
was the CTO of the Mastercoin Foundation.
The precursor to Tether, originally named "Realcoin", was announced in July 2014 by
co-founders Brock Pierce, Reeve Collins, and Craig Sellars as a Santa Monica based
startup.[17] The first tokens were issued on 6 October 2014, on the Bitcoin
blockchain. This was done by using the Omni Layer Protocol.[18] On 20 November
2014, Tether CEO Reeve Collins announced the project was being renamed to "Tether".
[citation needed] The company also announced it was entering private beta, which
supported a "Tether+ token" for three currencies: USTether (US+) for United States
dollars, EuroTether (EU+) for euros and YenTether (JP+) for Japanese yen. Tether
said "Every Tether+ token is backed 100% by its original currency, and can be
redeemed at any time with no exposure to exchange risk." The company's website
states that it is incorporated in Hong Kong with offices in Switzerland, without
giving details.[19]

In January 2015, the cryptocurrency exchange Bitfinex enabled trading of Tether on

their platform. While representatives from Tether and Bitfinex say that the two are
separate, the Paradise Papers leaks in November 2017 named Bitfinex officials
Philip Potter and Giancarlo Devasini as responsible for setting up Tether Holdings
Limited in the British Virgin Islands in 2014.[20] A spokesperson for Bitfinex and
Tether has said that the CEO of both firms is Jan Ludovicus van der Velde.[21][22]
According to Tether's website, the Hong Kong-based Tether Limited is a fully owned
subsidiary of Tether Holdings Limited. Bitfinex is one of the largest Bitcoin
exchanges by volume in the world.

For a while, Tether was processing US dollar transactions through Taiwanese banks
which, in turn, sent the money through the bank Wells Fargo to allow the funds to
move outside Taiwan. Tether announced that on 18 April 2017, these international
transfers had been blocked. Along with Bitfinex, Tether filed suit against Wells
Fargo in the U.S. District Court for the Northern District of California. The
lawsuit was withdrawn a week later.[citation needed]

In June 2017, the Omni foundation and Charlie Lee announced that Tether would soon
be issued on the Omni layer of Litecoin. In September 2017, Tether announced they
would be launching additional ERC-20 tokens for United States dollars and euros on
the Ethereum blockchain. Tether later confirmed the ethereum tokens were issued.
Currently, there are a total of five distinct Tether tokens: United States dollar
tether on Bitcoin's Omni layer, euro tether on Bitcoin's Omni layer, United States
dollar tether as an ERC-20 token, and euro tether as an ERC-20 token, and added in
2020 United States dollar tether as an TRC-20 token on the TRON network.

From January 2017 to September 2018, the amount of tethers outstanding grew from
about $10 million to about $2.8 billion. In early 2018 Tether accounted for about
10% of the trading volume of bitcoin, but during the summer of 2018 it accounted
for up to 80% of bitcoin volume.[11] Research suggests that a price manipulation
scheme involving tether accounted for about half of the price increase in bitcoin
in late 2017.[23] More than $500 million Tethers were issued in August 2018.[24]

On 15 October 2018 the tether price briefly fell to $0.88 due to the perceived
credit risk as traders on Bitfinex exchanged tether for bitcoin, driving up the
price of bitcoin.[25]

Tether Limited has never substantiated their claim of full-backing through a

promised audit of their currency reserves.[12][2]

In April 2019 New York Attorney General Letitia James filed a suit accusing
Bitfinex of using Tether's reserves to cover up a loss of $850 million. Bitfinex
had been unable to obtain a normal banking relationship, according to the lawsuit,
so it deposited over $1 billion with a Panamanian payment processor known as Crypto
Capital Corp. The funds were allegedly co-mingled corporate and client deposits and
no contract was ever signed with Crypto Capital.[26] James alleged that in 2018
Bitfinex and Tether knew or suspected that Crypto Capital had absconded with the
money, but that their investors were never informed of the loss.[26]

Reggie Fowler, who is alleged to have connections with Crypto Capital, was indicted
on 30 April 2019, for running an unlicensed money transmitting business for virtual
currency traders. He is believed to have failed to return about $850 million to an
unnamed client. Investigators also seized $14,000 in counterfeit currency from his
office.[27]

Tether runs on Ethereum and has been linked to Ethereum network congestion.[28]