Tether, one of the leading stablecoins in the market, has attracted fresh criticism after it quietly changed details of its token backing and excluded, ‘fully USD backed.’
No Independent Report To Support Claims
In earlier terms, the stablecoin had a USD backing at a ratio of 1:1. However, these claims have never been welcomed wholly in the cryptocurrency circles. Tether has never released an audit report from an independent audit firm to support the claim. With the new terms, the stablecoin seems to be backed with other things other than the U.S dollar.
The new terms on Tether’s website state:
“Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities.”
Tether has been holding on to a document from Freeh, Sporkin & Sullivan LLP, a law firm, which seems to agree with Tether’s claims that each USDT has $1 backing. However, the document cannot be fully trusted seeing that the law firm added a few paragraphs acknowledging that they are not an accounting firm and did not follow “generally accepted accounting principles.”
Its change of terms has been met with resistance. Tuur Demeester, a respected crypto analyst and investors, was one of those who read mischief in the new statement.
“Slippery language by Tether. ‘100% backed’ [to] ‘may also include receivables from loans issued.’ Imo this is a clear transition from full to fractional reserve banking… My concern is mainly about the precedent that this change in terms is setting: it opens the door to potentially start investing Tether’s reserve in assets that are illiquid or hard to value.”
Fernando Ulrich, a crypto podcast host and analyst, observed that while Tether may have 100% of reserves of issued tokens, the question is, “are they made of 50% Treasury-Bills, 30% bank certificate of deposits, and 20% receivables?…it’s the quality of reserves, not the quantity.”
Tether has however stood its ground regarding the change of terms. Stuart Hoegner, Tether’s general counsel, said:
“We generally do not comment on the specific composition of our reserves, but this change in optionality reflects the growth of Tether and the growth of the stablecoin industry.”
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