Tether

 

Tether is a controversial cryptocurrency with tokens issued by Tether Limited, which in turn is controlled by the owners of Bitfinex. Tether Limited formerly falsely claimed that each token was backed by one United States dollar, but on 14 March 2019 changed the backing to include loans to affiliate companies. The Bitfinex exchange was the subject of a lawsuit by the New York Attorney General of using Tether's funds to cover up $850 million in funds missing since mid-2018. The investigation found that iFinex — the operator of Bitfinex and Tether — made false statements about the backing of the Tether and about the movement of hundreds of millions of dollars between the two companies to cover up the truth about massive losses by Bitfinex. According to the New York Attorney General, "Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie".

Tether is called a stablecoin because it was originally designed to always be worth $1.00, maintaining $1.00 in reserves for each tether issued. Nevertheless, Tether Limited states that owners of tethers have no contractual right, other legal claims, or guarantee that tethers will be redeemed or exchanged for dollars. On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents. In May 2021, Tether published a report showing that only 2.9% of Tether was backed by cash, with over 65% backed by commercial paper.

Tether Limited and the tether cryptocurrency are controversial because of the company's alleged role in manipulating the price of bitcoin, an unclear relationship with the Bitfinex exchange, its apparent lack of a long-term banking relationship, and the company’s failure to provide a promised audit showing adequate reserves backing the Tether token. Author David Gerard was quoted by the Wall Street Journal saying that Tether "is sort of the central bank of crypto trading ... [yet] they don't conduct themselves like you'd expect a responsible, sensible financial institution to do."Tether's price decreased to lows of $0.90 on 15 October 2018 on speculation that investors are losing faith in the token. On 20 November 2018, Bloomberg reported that U.S. federal prosecutors are investigating whether Tether was used to manipulate the price of bitcoin. In 2019, Tether surpassed Bitcoin in trading volume with the highest daily and monthly trading volume of any cryptocurrency on the market. As of May 2021, there are 59.9 billion USDT in existence.