Tethered To What?
The internet has been awash with talk of the recent update to Tether‘s terms of service. It was quietly updated on the 26th of February and announced via a recent Reddit post.
Not only is it in the statement in their terms of service but also on their homepage.
” 1.1.32 “Reserves” means 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;” -https://tether.to/legal/
So what exactly do they mean by ”may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities”? It sounds like they are admitting to the fact they‘ve been loaning US dollars to related parties for some time. I think there‘s a good chance that one of those related parties is Bitfinex.
I‘ll be honest with you, I‘m not a fan of USDT. There have too many red flags and questions gone unanswered. Tether sacked their auditor back in early 2018, citing ”excruciatingly detailed procedures” as the reason for the decision. Bitfinexéd published a superb analysis of the decision.
What did Tether say about the recent update to their terms?
In a statement to The Block:
”Our most recent revisions were intended to update our disclosures to reflect Tether’s growth and operations and to be consistent with the types of disclosures used by other institutions… The only change is that the composition of the assets that provide that backing includes a combination of cash, cash equivalents, and may also include other assets or receivables from loans issued by Tether.” -Tether (abridged)
Having confidence in an asset-backed token requires:
1. The issuer holds the amount of assets they say they do
2. The assets are in the form they say they are
Loans to affiliated parties, or any party, will be far less secure than having the cash in the bank. Tether should not be making money on the side with dodgy loans to their friends or other investments. It is to provide a secure stable coin, and that should be the only thing they focus their activities on.
Tether should restore faith in USDT by stating what those loans and investments are. An audit is urgently needed too. There are so many new stablecoins on the market now that provide far greater transparency and assurances than Tether does.
Your move, Tether.