Tether (USDT) Silences Critics with Releases of Transparency Report
Stable coin Tether (USDT) has released a transparency report, months after severing ties with another auditor.
Before now, USDT has been viewed by many as the one cryptocurrency that could crash anytime, taking with it the leading crypto BTC.
Why? It was seen as being shady and opaque- simply put, it didn’t want to be audited.
In January, Tether, the company behind stable coin tether (USDT) broke links with its auditor.
The exit of auditing firm Friedmann LLP threw a spanner in the works of a coin that has barely stayed out of the limelight ever since. It has been accused of being at the center of Bitcoin price manipulation.
Earlier this June, two researchers from University of Texas pointed out that “Bitcoin returns are highly correlated with the magnitude of Tether issuance, and no abnormal returns are observed in months when Tether is not issued.”
It mirrors other reports that appeared to show that Bitcoin experienced huge price swings whenever Tether is released.
Criticism and speculation about Tether-USD reserves
Also criticized has been its close links with trading exchange Bitfinex. But of greatest concern, and the source of the most fervent criticism of Tether has been a lack of transparency.
Of special interest to critics was that the company was deliberately avoiding auditing to hide its ulterior motives.
Speculation has always been there regarding whether the coin was backed up by US dollars in the ratio of 1:1.
Tether has released a transparency report updating its USD reserves and confirming that indeed, every tether token is backed up by US dollars held in banks.
Although it’s not a full audit report, law firm Freeh Sporkin & Sullivan LLP (FSS) has confirmed the same based on data provided by banks.
Even though an official audit report is what everybody wants to see, the update is based on the findings by FSS, a reputable Washington-based law firm.
As such, what one can deduce from the latest developments is that the company has somehow silenced its detractors.
Tether begins its report by acknowledging its own failings.
The company agrees that it could have done better by engaging the community, saying:
“whilst we recognize our own lack of engagement with the greater community, it is our belief that much of the speculation and negative reporting has been the result of misunderstandings of how Tether functions.”
In light of the report, Tether has affirmed that every USDT token in circulation is backed up and that “Reserves have always, and will always, match the number of Tethers in circulation”.
FSS was able to review financial details, AML reports, bank registration details as well as policies with regard to the release of new tether coins into the market.
Other details looked into included personal information and records of all outstanding tethers.
And Tether has gone ahead to clarify every detail concerning the issuance, transaction histories, and such other details are accessible to the public via Omnichest.info and Etherscan.io.
2.5 billion USDT fully backed
According to the report, a total of $2,545,067,236.82 US dollars were fully backed by reserves. The law firm found that these reserves were held in two bank accounts held by Tether. FSS shares a similar sentiment, concluding that:
“FSS is confident that Tether’s unencumbered assets exceed the balance of fully-backed USD Tethers in circulation as of June 1st, 2018.”
One of the criticisms to be highlighted here surrounds a recent study by scholars at the University of Texas at Austin (UTA).
The study claims that “If Tether is pushed out to other crypto exchanges rather than demanded by investors with dollars in hand, Tether may not be fully backed by dollars when issued.”
It should be agreed that FSS didn’t conduct an audit and that they examined records provided by Tether partner banks.
There are a lot of questions still to be answered though. The transparency report should just be the first step by Tether towards allowing a full audit by an auditing firm.
For now, critics will likely take time to find out more about the report.
It’s unlikely the end of the matter, but FSS may have provided Tether with a reprieve from severe criticism. But at least we know that tether/USD is sufficiently backed up.