Tether (USDT) is an Ethereum-based ERC20 token originally called a stablecoin and designed to be worth $1.00. The cryptocurrency’s tokens are issued by Tether Limited. But, first things first. Let’s answer the question: what is stablecoin?
What exactly is stablecoin?
If you’re involved in crypto space, you’re probably aware that cryptocurrencies’ values tend to be highly volatile. One day you have one price, and the next day it can be something completely different. This is what stablecoins are trying to solve: they are meant to be stable in a fluctuating market.
On the crypto market, you can find a lot of stablecoins such as Tether (USDT), Digix Gold (DGX), and Maker (MKR). The real question is: how long will they last?
What does all this have to do with Tether?
As I already mentioned, Tether was called a stablecoin at the beginning. The idea was to make it easy for investors to transfer fiat currencies to cryptocurrencies. Soon, the tokens became a part of trading pairs on crypto exchanges such as Binance, Bitfinex, Poloniex, and Coinbase.
But that didn’t last long. The twist came in March 2019, when the company announced that it would add cash equivalents, receivables from loans, and other assets to its reserves.
According to its website, reserves, at the moment, “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 and Bitfinex scandal
Bitfinex is a crypto exchange based in Hong Kong, and you can use it for trading with Tether tokens. Plus, the exchange is considered to be one of the top exchanges when it comes to daily trading volumes.
In April 2019, the New York Attorney General’s office accused Bitfinex of covering up a $850 million loss by using Tether (USDT). As a result, this announcement impacted on Tether’s price.
Conclusion
The scandal with Bitfinex is far from being the only scandal involving Tether. There were also allegations regarding Bitcoin price manipulation. Despite all of the controversies, Tether is continuing its development, but not as a stablecoin anymore.
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