Tether is the Bruno of crypto (we don’t talk about either).
Get ready—whether you’re familiar with Tether or not, it’s about to become a major topic of conversation. Tether is making waves in the crypto world, and you’ll be hearing a lot more about it soon.
Introduction to Tether
Tether (USDT) is a type of cryptocurrency. It is designed to be a stablecoin, meaning its price is supposed to remain stable and pegged to a specific asset or currency. It is issued by Tether Limited, a company closely associated with the cryptocurrency exchange Bitfinex.
Tether’s Price
As a stablecoin, the USDT price is supposed to remain stable because it’s pegged to the price of another asset. In their own words, “All Tether tokens (USD₮) are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether’s reserves.”
Tether’s Market Cap
As of June 8, 2024, Tether has a $112.5B market cap, making it the 3rd largest cryptocurrency. To put this number into context, Bernie Madoff‘s Ponzi scheme is valued at almost $65B.
Market capitalization, often shortened to “market cap,” is one metric typically used in the stock market. It measures the total value of all outstanding shares. Crypto uses market cap the same way to value tokens. According to CoinGecko, here’s how to calculate market cap.
Let:
A = Current cryptoasset price in USD
B = Circulating supply of an asset
Market Capitalization = A*B
Tether’s Legal Issues
Tether has already faced legal issues, particularly in New York.
In 2021, they reached a settlement agreement with the State of New York. As part of the settlement, they paid a $18.5M fine and agreed to “end all trading activity with New Yorkers.”
A press release announcing this step said pointedly, “Bitfinex and Tether Deceived Clients and Market by Overstating Reserves, Hiding Approximately $850 Million in Losses Around the Globe.”
Tether’s Leadership
A former plastic surgeon, a questionable poker executive, and a former child actor with his own history of legal trouble are among Tether’s ringleaders and early promoters.
The Wall Street Journal has been reporting extensively on Tether (the company and the coin). In a February 2023 article, they state: “The firm releases little information about itself, much like the rest of the crypto industry. It has never disclosed its ownership structure, the details of how its assets are managed and how it would prevent a wave of redemptions from toppling the cryptocurrency.”
Critics and Concerns
Tether was listed under Financial Stability Challenges in a June 2021 presentation by Boston Fed President Eric Rosengren.
It has even been called “a financial Chernobyl waiting to happen.”
United States Senator Cynthia Lummis co-wrote a letter naming Tether with United States Representative French Hill to the Department of Justice. Senator Lummis asked “DOJ to finish its investigation and consider criminal charges against Binance and Tether after reports they served as intermediaries for Hamas and engaged in illicit activities.”
In prepared remarks given at the 2023 Blockchain Association’s Policy Summit on November 29, 2023, Deputy Secretary of the Treasury Wally Adeyemo said: “We cannot allow dollar-backed stable coin providers outside the United States to have the privilege of using our currency without the responsibility of putting in place procedures to prevent terrorists from abusing their platform. And we cannot permit offshore financial services providers to use jurisdiction-evasion tactics to avoid complying with our laws. We are working to close these gaps and others.”
Media Coverage
Until recently, Tether was rarely mentioned in mainstream media.
Investigative reporter Zeke Faux has been on the case for a while. He wrote an incredible book on Tether called Number Go Up, which Wired included in its 16 Best Books of 2023 list.
On Saturday, February 17, 2024, Bloomberg published “Bahamas Bank Deltec Accused of Giving Bankman-Fried ‘Secret’ Credit to Buy Tether,” an article by Zeke Faux. It confirms many details that skeptics have long suspected to be true and reveals a declaration from former Alameda CEO, Caroline Ellison, from a new FTX-related trial.
Even Tether is talking about Tether. By their own admission, they have “recently onboarded the United States Secret Service into its platform and will be working with the Federal Bureau of Investigation to do the same.” As of June 2024, no one really knows yet that this means.
Looking Ahead
Tether faces a number of significant challenges. The debate over Tether’s backing seems quaint when compared to claims it’s used for pig butchering scams and terrorism financing.
It’s clear there will have to be a reckoning with Tether.
Regardless the outcome, it will likely evoke strong reactions from around the cryptoverse.
If you’re concerned about a child or loved one, check out our guide to problematic crypto trading!
