What Is The USD Tether (USDT) Scam Story About?
✍️ 29 December, 2022 - 12:28 👤 Editor: Jakub Motyka
- Experts claim that the stablecoin USD Tether (USDT) lacks enough reserve backing.
- Regulators are concerned that Tether could destabilize financial systems.
- The latest news about cryptos is on our Telegram channel.
Stablecoin Tether (USDT) is a digital asset that is supposed to be backed one-to-one by the US dollar, but rumours claim the asset could be a scam and lacks the backing it claims to have. How does USDT work? The digital asset is issued by Tether Holdings Ltd – which takes deposits in dollars from users and sends them USDT.
Once a user receives the stablecoin, they can use it on exchanges to trade crypto. Afterward, one can send the stablecoin to the platforms and get back their USD. USDT gained popularity since most banks did not want to transact with cryptocurrency companies.
Rumours Has It That USDT Lacks Sufficient Backing
The crypto online community argues that USDT lacks enough reserves to sustain the 1:1 USDT-USD ratio. The rumours increased when Tether Holdings started minting too many USDTs. Currently, the number of circulating USDT is 66,242,944,900 billion from a total supply of 73, 141,766,321 – per data provided by CoinMarketCap - and the number has been rising. For instance, between October 20-October 21, Whale Alert reported that 450 million entered the market.
The rapid expansion of USDT has caused concerns about a possible bank run and its impact. Besides, sources shared with Bloomberg in May that Tether executives were putting investors’ funds in risky assets to make profits.
The US Regulators Are Concerned About The Fast Expansion of USDT
This year, the US treasury secretary Janet Yellen met the Federal Reserve Chair, the head of the SEC, among other officials, to discuss Tether. According to the secretary, the stablecoin had grown significantly and threatened US financial systems. What is worrying the US watchdogs is the unregulated nature of Tether.
Said New York’s Attorney General Letitia James: ‘‘Tether is operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system’’. In a recent interview, Tether officials claimed to be registered with the British Virgin Islands Financial Investigation Agency. However, according to a report by Bloomberg, the agency dismissed the claims.
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