The most popular stablecoin Tether (USDT) is not fully backed, according to its lawyer. The general counsel of USDT issuer explained that the stablecoin is only 74 percent backed by fiat equivalents as of today April 30. This confirms some of the accusations made against Tether.
Tether Is Not Fully Backed
The company behind USDT, Tether, is holding about $2.1 billion in cash and other securities. This is according to Stuart Hoegner, the general counsel of the company. This means that the firm is insolvent and it only has 74% of the necessary assets to back the USDT in the market.
According to the New York Attorney General, Bitfinex borrowed more than $600 million from Tether after the firm lost $850 million. This is an investigation that was unveiled a few days ago and that affected the whole cryptocurrency market.
Hoegner explained that USDT is not backed 100% by cash or other liquid assets. On the matter, he commented:
“As of the date [April 30] I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totalling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.”
The Omni Explorer shows that there are over 2.8 billion USDT tokens issued at the time of writing this article. At the same time, CoinMarketCap shows that there are more $2.84 billion USDT coins issued to the market.
Back in March 2018, Tether informed that it is not backed 1-to-1 by traditional currency but it added cash equivalents, receivables from loans and other investments.
It is worth mentioning that Bitfinex lost $850 million due to the fact that they have placed more than one billion dollars of funds in a Panamanian payment processor. However, they did not sign any contract and the firm is not giving the funds back, which created a problem for Bitfinex.
Finally, and this is the icing on the cake: reason Bitfinex is missing $850M is they placed over one billion dollars of commingled customer and corporate funds with a Panamanian payment processor … *without a contract*. And this Panamanian company is not returning the funds. pic.twitter.com/A6ya5bDnmH
— Alex Krüger (@krugermacro) April 30, 2019
Zoe Phillips, another attorney representing Tether informed that the company does not need to hold $1 for every single USDT issued. About it, she wrote that AAttorney General is wrong on multiple levels about thinking that Tether must hold $1 in cash fiat currency for every single dollar of Tether issued.
“Tether and holders of tether have a keen interest in ensuring that one of the dominant trading platforms of tethers has sufficient liquidity for normal operations.”
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