Despite the large number of controversies surrounding it Tether doesn’t seem to be showing any signs of taking things seriously. The company just issued $250 million dollars worth of USDT tokens in one go. This has once again sounded the alarm that the company is not properly backing up tokens issued by it with actual US dollars in reserves. And this time the controversy has been created by the company when a number of other stablecoins are also being launched by various companies to compete with it, so we can’t be sure at the moment how this recent issuance of new tokens will play out for the company.
At the moment USDT token issued by Tether is the largest stablecoin out in cryptocurrency market. The current market supply of USDT tokens is worth $2.5 bilion, and that’s what has led to the speculation that Tether is not backing up the tokens issued by it with US dollars in a 1:1 ratio as it had promised.
Creating tokens out of thin air is against the idea of a stablecoin because the stability factor can be undermined if supply depends on the whims and fancies of a company. And when that company is controlled by one of the largest exchanges in the world (Tether has been founded by Bitfinex management team), things become way more serious for entire cryptocurrency market.
It has been alleged since quite some time that Bitfinex management team is artificially inflating the prices of Bitcoin and other major cryptocurrencies with the help of Tether for their own benefit. Market analyses have found links between issuance of new Tether tokens and spikes in the prices of Bitcoin and Ethereum. Even today the price of Bitcoin jumped $120 and price of Ethereum about $10 within an hour of these new Tether tokens worth $250 million being issued.
CFTC has issued subpoenas to Bitfinex and Tether management teams several times for an external audit of their systems and accounts, but the company hasn’t complied till date. These things have led to the doubts that one day Tether, the so-called stablecoin, may crash the entire cryptocurrency market.
It’s also worth noting that despite having a monopoly in this stablecoin sphere, Tether is far from being alone. There’s also a competitor called TrueUSD (TUSD) and recently Circle has also announced the plans to develop its own stablecoin backed by US dollars. These players are also willing to comply with the regulatory requirements of authorities.