Tether (USDT) is a stablecoin that is pegged to the U.S. dollar at a 1-to-1 ratio. Helping provide liquidity and offer a widely recognized token that can facilitate transactions between various cryptocurrencies. It is currently the third most widely held coin behind Bitcoin and Ethereum and has a $25 billion market capitalization.
But questions continue to surround Tether about whether it is a tool to artificially inflate the value of Bitcoin. Tether’s lack of transparency in most everything about their business further brings out even more critics.
The biggest critics, which include a number of US law enforcement agencies, claims that Tether is part of a massive scam. That involves using the company’s in-house currency to buy Bitcoin. Which has the intended side effect of juicing the price of Bitcoin, and to otherwise manipulate cryptocurrency markets.
Tether is currently under investigation by the New York Attorney General’s office. Also facing a class-action lawsuit that accuses it of contributing to “the largest bubble in human history.” Tether’s value to the crypto industry has increased tremendously since that bubble burst in 2017.
Tether’s market capitalization rose almost $20 billion over the past year. January of this month alone Tether has pushed $3.8 billion more USDT into the crypto ecosystem. The growth itself is something that even the company themselves didn’t see coming.
“We’re not sure that anyone could have foreseen this level of growth and use cases of tether at the very beginning,” Tether’s chief technology officer Paolo Ardoino said. “We were confident that it was a useful token, but didn’t anticipate quite how useful it could be.”
Demand For Tether Called Into Question
The demand for Tether has been called into question with some numbers to back it up. Cryptoquant has been able to use data from exchanges to calculate a “stablecoin ratio.” According to its CEO Kim Young Ju, “The ratio for stablecoins like USDC is like 18%-25%, depending on the exchange. Tether is just 7%, meaning most of the demand didn’t come from exchanges.”
Tether does have a transparency page. It does not regular attestation from any third party that the amount of USDT in circulation matches a bank account somewhere.
In regards to all of the ongoing investigations Tether General Counsel Stuart Hoegner released this statement to Coinbase.
“We work with regulators and law enforcement agencies around the world helping their investigations and help them understand our business. We always want to support law enforcement’s legitimate objectives. With respect to the New York Attorney General’s special proceeding, we believe that our discussions with their office has been constructive and we look forward to continuing the conversation.”