If you followed the crypto-news this past week, I’m sure you read about the seeming correction of the entire crytpo-market. However, keen eyes over at CNBC had spotted one token that slightly gained. It’s Tether and it token seems to be steaming ahead, but things aren’t really as straightforward as they seem.
What is Tether
If you haven’t heard about Tether, here’s the short of it: Tether is a cryptocurrency that touts itself as being “Money built for the internet”. Because the token is pegged, or “tethered” (see what they did there), to the US Dollar and is backed 1:1 by the comforting tangibility of good ol’ fiat it can be redeemed for USD, Euros, and soon it will also support Yen. Be that as it may, Tether’s site does have this nice little nugget nestled away in the legal terms:
Absent a reasonable legal justification not to redeem Tokens, and provided that you are a fully verified customer, your Tokens are freely redeemable…. [citizens of certain US states] are not permitted to cause Tethers to be issued or redeemed; and, are not permitted to hold Tokens. Beginning on January 1, 2018, Tokens will no longer be issued to U.S. Persons.
Tether Backed 1:1? “No, Really, They are!”
This begs the question, “how then is the token supposedly backed 1:1 by USD if no US citizen can now have them rightfully issued to them or, in some cases, redeem them?” At present, it’s only open to speculation, but then again there are a lot of mysteries surrounding the token, such as a $30 million hack in November as well as Tether’s unclear ties to sister company, Bitfinex, which had it’s own scandal. From the Bitfinex Wikipedia page:
In April 2017, Bitfinex announced that it was no longer able to let users withdraw their funds in USD, after Wells Fargo cut off its wire transfers. Bitfinex and Tether sued Wells Fargo for the decision, but dismissed the case few days later. As a consequence, Bitcoins were traded at a price around 100 USD higher than other exchanges as users started buying bitcoins in order to move them to other exchanges and withdraw their funds there. Shortly after the Wells Fargo cutoff, Bitfinex stated all international wires had been cut off by its Taiwanese bank. Since then, Bitfinex has moved between a series of banks in other countries, without disclosing to customers where the money is stored.
The claim that the Tether is fully transparent and subject to professional audit- an audit has never been published- is disingenuous. It seems as though Tether tokens can’t be used in their stated capacity in America. However, Tether still find itself in apparent good light by CNBC.
To be fair, CNBC does close with a bit of a caveat emptor by bringing up the revealing leak of Tether’s connection to the British Virgin Islands with a one line mention of the Paradise Papers, but that’s another story entirely. You can read more about that story on Bitcoin.com.