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There’s a lot of buzz recently around the cryptocurrency startup, Tether, and not the good kind. Tether asserts that it converts cash into digital currency (to the crypto USDT) that is backed by conventional money at a 1:1 ratio; meaning, that 1 USDT is allegedly equal to 1 USD. Yet, there have been numerous allegations that Tether does not actually back all of its assets as it proclaims.
In order to fight these allegations, last year Tether had partnered up with the audit firm Friedman LLP; however, the partnership had ended abruptly in January this year, which ultimately only added to the doubt and suspicions around the startup.
Since then, the pressure on Tether only grew and culminated with an explosive report of researchers from the University of Texas who claim that manipulators in the crypto-market had employed Tether to inflate the value of Bitcoin. Adding to the tumult, notable economists began to regard Tether as a criminal venture; for instance, Professor Nouriel Roubini referred to Tether as “The Mother Of All Criminal Scams,” no less.
Tether is indeed The Mother Of All Criminal Scams whose only purpose is to manipulate upwards the price of Bitcoin and other major crypto-currencies. https://t.co/7VMUVXpIfQ
— Nouriel Roubini (@Nouriel) June 16, 2018
To fight these severe accusations, Tether recently released a “Transparency Update,” professing that the critics are utterly wrong:
To address allegations head on, we wish to make a few things clear: All Tethers in circulation are fully backed by USD reserves. Full stop. Memoranda, consulting reports, industry leaders, cryptocurrency pioneers, and competitors have all confirmed this. Reserves have always, and will always, match the number of Tethers in circulation.
Tether also reported that it had retained the services of the law firm Freeh, Sporkin & Sullivan LLP “to perform a randomized inspection of the numbers of Tethers in circulation and the corresponding currency reserves,” and after the firm concluded its inspection it has found that “all Tethers in circulation as of June 1, 2018 are fully backed by existing USD reserves.”
But this inspection still left many critics unimpressed, and skepticism still revolves around the startup.
Like Tethers, the so-called report is not worth the paper it's not printed on. We were not born yesterday. pic.twitter.com/guPrrt8Znw
— Bitfinex'ed 🔥💥 (@Bitfinexed) June 20, 2018
As a startup that develops a Blockchain-based exchange platform which issues backed tokens ourselves, our curiosity here at AllStocks was naturally piqued when he heard about this whole affair. We feel obligated to elucidate that such an incident simply cannot occur to us for the mere reason that our system automatically creates backed tokens ONLY whenever a client executes an order and the real asset is transferred; the backed token is correspondingly burned when the user executes a reverse order.
You can learn more about our exchange platform and our backed tokens in our whitepaper.