Tether: dollar reserve holdings may not be there

[Obao6]

https://cryptonomist.ch/en/2019/03/14/tether-dollar-reserve-holdings/

Tether’s website has been updated and the stablecoin’s Terms and Conditions have been “silently” changed
While previously every USDT corresponded to one US dollar in the company’s reserve holdings, now it is stated that “every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”)”.

[avikz]

It's a long ongoing suspicion about USDT that they don't have 1:1 USD reserve. Especially when the books of the company was never audited. It's good that they came up with an explanation but they didn't provide any break up of the reserves yet. So it will be an ongoing dilemma until they provide a break up of their reserve.

Also I don't see any issue in using other assets as a reserve till the time they can justify the overall volume. But their books need to be audited by a reputed third party.

[mu_enrico]

the books of the company was never audited

Yep, it is obvious that they implemented "fractional reserve"-like system because of lack transparency. I wouldn't be surprised if Tether only has $100 million from its $2 billion market capitalization.

[crwth]

There has been a lot discussion towards that and maybe it is needed to be discussed, surely.

This is the thread: https://bitcointalk.org/index.php?topic=2805586.0

It is maybe it’s way to correct what they have done, in the mistake that they always say that it is 1:1 which is only mean to the equivalent. So it maybe a different thing like any other valuables that is of the same value.


This could be a helpful reference towards what happened to the investigation towards USDT

Bitfinex Investigation Outcomes: Manipulations with the Fall in the USDT, Trading Bots Involved

[Tamilson]

I think that's an old issue as some says tether don't really have a 1:1 backed up and now tether had confirmed this. Anyway, this is also good that they vouch it but yet people should how much is the reserve. While this will bring uncertainty to tether as people will definitely lose trust to it.

As what they had said;

This means that Tether is no longer a 100% US dollar-backed stablecoin since the underlying can also include other currencies.

[o_e_l_e_o]

I pointed this out months ago (https://bitcointalk.org/index.php?topic=5062763.msg47634680#msg47634680). The nonsense letter that they released in November of last year stated that Tether's "portfolio cash value" was $1.8 billion. "Portfolio cash value" specifically means the final value after all assets have been converted to cash. They've not had enough USD to back up USDT in months, if ever. It seems they've finally changed their Terms and Conditions to catch up with what they've been doing for months already. It's highly likely the majority of their assets are not cash, and we have no guarantee, other than what they tell us, that these assets are worth what they say they are worth. I've said it before, and I'm sure I'll end up saying it several more times before their inevitable collapse - don't trust Tether.

They could have put all this to bed immediately at any time in the past several months by submitting to a full, independent audit of their finances. The only reason they have for refusing to do so is if they have something to hide.

[TheCoinGrabber]

They were really never audited by someone outside the company, right? That's the reason I've found this coin sketchy, you'd have to trust that they do have enough USD as reserve. Imagine if there's a cash run.

[dothebeats]

They were really never audited by someone outside the company, right? That's the reason I've found this coin sketchy, you'd have to trust that they do have enough USD as reserve. Imagine if there's a cash run.

Yes, no external audit were done on Tether AFAIK so it's really hard to believe that they are true to their 1:1 conversion and that they really have USD reserves ready for every USDT available. I am inclined to believe that they didn't have the USD reserves in the first place, and only have assets that can be changed into USD in the event that they needed it, hence why they are constantly dodging audits and whatnot. Tether has never been so transparent to people, and that's where my fears and doubts are rested. All the people need to know is an external, reliable audit and that's it.

[o_e_l_e_o]

They were really never audited by someone outside the company, right?

Correct. They kept deflecting and making excuses, and then finally released this letter last November, which is just a joke: https://tether.to/wp-content/uploads/2018/11/Tether-Letter.pdf

A tiny unknown bank in a tax haven country releases a letter with no names or signatories stating they hold assets (note: not cash) equal to $1.8 billion based on the "information currently in their possession" - in other words, what Tether have told this bank the assets are worth. Essentially their proof of assets is a letter from an unknown saying that the assets are worth what Tether told them they were worth. Utterly laughable.

Imagine if there's a cash run.

Then Tether would crash, and many people would be left either trying to sell their USDT at far less than 1 USD each, or unable to sell at all. Their "assets" could quite easily include other cryptocurrencies. Create 1 million USDT out of thin air, sell it all for $1 million of BTC, and then they can claim that these 1 million USDT are fully backed by their assets. It's a complete scam.

[Crypdon]

Whatever they tether their tether to one cannot complain about it's price, it always seems to be stable. It serves it's purposes and there are others like it such as gemini USD

[o_e_l_e_o]

Whatever they tether their tether to one cannot complain about it's price, it always seems to be stable.

Except when it isn't. There was a period of 2 months at the end of last year where it fluctuated around $0.95, and it has previously dropped as low as $0.91. Not great for a "stable" coin. And you can absolutely complain when they silently change their Terms and Conditions to state that the coin they have spent so long claiming was fully backed up 1:1 with USD, is in fact backed up by anything and everything they like, including "receivables from loans". Right, because no one has ever defaulted on a loan before? We still have no idea what there reserves actually are because they still refuse to allow an audit. Tether is a complete gamble at this point.

[Pab]

If anybody believe that tether has 2 bln dollars reserve than that person is so naive
If Tether has that money than investigation has to be done where that money came from
It is one big surprise for me that regulators didn't start any really serious trial against Thether
Where are that money
With that kind of money there is possible to influence markets or make massive ML
As for now some exchanges owned crypto trading thanks to Tether

[ryap12]

If anybody believe that tether has 2 bln dollars reserve than that person is so naive
If Tether has that money than investigation has to be done where that money came from
It is one big surprise for me that regulators didn't start any really serious trial against Thether
Where are that money
With that kind of money there is possible to influence markets or make massive ML
As for now some exchanges owned crypto trading thanks to Tether

The problem is that only a few bats an eye regarding if they have the reserves or not. But that sure is a lot of money and of course authorities will check on it soon. Does this mean it is not safe to choose it as a stable coin then? Right?

[DooMAD]

Does this mean it is not safe to choose it as a stable coin then? Right?

"Safe" is a matter of perspective.  Bitcoin (and other altcoins that don't require backing) are not dependent on trust.  The vast majority of stablecoins are entirely dependent on trust.  They require you to believe that a centralised entity is holding the reserves they claim to hold.  It's a risk you have to judge for yourself.  

[o_e_l_e_o]

If Tether has that money than investigation has to be done where that money came from

It's quite simple really:

1) Create 2 billion USDT out of thin air.
2) Sell these 2 billion tokens for bitcoin.
3) Sell this bitcoin for 2 billion USD.
4) Profit.

With the constant stream of news/information/updates that Tether is pretty much insolvent, coupled with the fact there are more and more stable coins out there to choose from, I continue to be amazed that people are using it. If people haven't smartened up and its market share is still as large as it is now when it collapses (and it will), we are looking at taking a big hit to all markets.

[aad140386]

Yes, really quite muddy company. I never wanted to mess with Tether. Of course, at one time they offered a very good idea, but their activities always seemed very suspicious to me. From the very beginning of the project, there were a lot of scandals around it, and I think that these were not unfounded accusations. It seems to me that such projects as Tether should be as open as possible to the crypto-community in order to earn the trust of people and act for the long term. It is possible that in 2019 we will get many more stablecoins and they will have to be studied very carefully before investing in them.

[hugeblack]

Tether is walking along the same lines as the paper money. He began to tie it to gold and quickly printed a lot of money to end up with promises.

Extensive reliance on stable coins is more dangerous than paper money itself. I expect a major collapse of these currencies as soon as legislative laws are enacted.
Believe me, Tether will be like Tulip mania.
Also, the appearance of those company based cryptocurrencies is infused with a lot of mystery in addition to some systems such as Binance Coin.

[DooMAD]

I expect a major collapse of these currencies as soon as legislative laws are enacted.

Legislation is definitely an important point in this discussion.  Decentralised cryptocurrencies with nodes in just about every point on the Earth are difficult to legislate for.  But if you have a single entity holding fiat or other assets in reserve, that entity will likely be subject to only a small number of legal jurisdictions.  Perhaps just the ones where they base their headquarters and any where they store their backing funds/assets.  It will be comparatively easy for legislative bodies to enforce any appropriate laws.  This is why centralised systems are inherently weaker.

[gentlemand]

Tether is walking along the same lines as the paper money. He began to tie it to gold and quickly printed a lot of money to end up with promises.

Extensive reliance on stable coins is more dangerous than paper money itself. I expect a major collapse of these currencies as soon as legislative laws are enacted.
Believe me, Tether will be like Tulip mania.
Also, the appearance of those company based cryptocurrencies is infused with a lot of mystery in addition to some systems such as Binance Coin.

The new crop of stablecoins are a very different beast. I'd trust the dollars backing them are real. I would not trust the crews that issue them to guarantee me access to them.

Because the less opaque stablecoins are so desperately eager to comply most people won't ever want to use them. I've never touched USDT and never would. I'll never touch any other stablecoin because of that.  

It's depressing how things have been allowed to get like this by this stage. I really thought it could've shaken off shit like this by now.

[LUCKMCFLY]

From the point of view of any market speculator, it is alarming, since a stable currency was a guarantee to take refuge and think it was equivalent to USD, when being backed by other currencies does not fully guarantee the value that is believed to protect.

You must establish or seek an exchange that guarantees FIAT money in USD, since at the time of a fall, if it is backed by a currency, it will continue to fall, it will begin to be a non-stable currency that would be affected by high volatility. Personally I had some confidence in Tether, but now it is difficult to operate with conditions like that.

The only exchange that FIAT USD guarantees is Bitfinex and has high requirements to be there for new accounts, since it must have at least $ 10k or the equivalent in cryptocurrency.