The Office of the Attorney General of New York (NYSEAG) issued a statement saying that the Office of Audit (OAG) is investigating " fraudulent practices by Bitfinex and Tether ." According to NYSAG, at least $700 million was withdrawn from Tether's reserves to cover Bitfinex's trading losses.
Affected by this news, the price of USDT has experienced abnormal fluctuations: starting at 6 am Beijing time, the price dropped by 2.1% within 3 hours, and the lowest fell to 0.985 US dollars.
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The USDT is the most widely used and circulating stable currency in cryptocurrency. Its every move involves the nerves of the market. Is this a black swan incident or a false alarm?
01 USDT and Tether's introduction
The USDT is a Tether USD (hereinafter referred to as USDT) based on the stable value currency US Dollar (USD), 1 USDT = 1 USD.
In late November 2014, Bitfinex's Chief Strategy Officer, Philip Potter, and Chief Financial Officer Giancarlo Devasini founded Tether in the British Virgin Islands and issued a stable digital currency USDT with a 1:1 anchor.
After the release of the USDT in February 2015, Bitfinex announced a USDT transaction. Subsequently, the trading platform Poloniex also announced support for USDT. Poloniex has risen strongly with the Ethereum and has also brought in the volume of USDT transactions.
It is reported that users can use the USDT and USD for 1:1 exchange at any time. Tether strictly adheres to the 1:1 reserve guarantee, that is, for every USDT token issued, its bank account will have a one-dollar guarantee. Users can check the funds on the Tether platform to ensure transparency.
Tether's CTO and co-founder Craig Sellars said that users can wire the US dollar to the bank account provided by Tether through SWIFT, or exchange the USDT through the Bitfinex exchange. When redeeming the dollar, the reverse operation can be done. Users can also exchange bitcoin for USDT on the above two websites.
Currently, USDT's market share is the largest of all stable currencies.
02 has been suspected, always difficult to prove
Although USDT occupies a large share of the stable currency market, since its inception, USDT has been suspected by investors: accounts are not regulated; random issuance; always obscured during the audit process, some core information is not willing to Disclosure; the relationship with the trading platform Bitfinex is complicated…
On February 8, 2017, an author nicknamed "Bitfinex'ed" published an article on Medium called "Bitfinex Don't Want to Hear". The multiple recordings included in this article show that the Tether team and the Bitfinex team are discussing bank fraud, money laundering, and even acknowledging financial fraud.
An executive at Tether, Phil Potter, even admitted in the leaked recording that the company had set up a company account in Taiwan to transfer money and did something that needed to be "obscured." At the time, Phil Potter was not only the head of Tether, but the chief strategist of Bitfinex.
A few months later, Phil Potter officially resigned as Chief Strategy Officer and said that "With the expansion of Bitfinex worldwide, I as an American need to re-examine their position in the team."
In April 2017, due to financial fraud, Tether’s three bank accounts in Taiwan were banned.
On January 24, 2018, an anonymous report stated that as of January 4, 2018, Tether had issued a total of 91 additional USDTs. The report also raised the question: Does Tether transfer USDT to Bitfinex's wallet without receiving the US dollar, and use USDT to buy low-priced bitcoin for profit or trade.
In the face of market rumors, on June 20, 2018, Tether issued a "Transparent Report" issued by a law firm. This transparent report not only did not reassure investors, but also caused more doubts. Tether explained that because the four major accounting firms are not willing to endorse them, they can only ask for help from law firms.
On October 1, 2018, Bloomberg reported that USDT's custodian bank, Noble Bank, was insolvent and had lost many customers, including Tether and Bitfinex, and is currently looking for buyers to sell it. assets.
On October 15, Bloomberg again wrote that if the government authorities were looking for any evidence of Tether’s wrongdoing, or if users lost confidence in Tether’s ability to redeem its cryptocurrency for $1, the USDT would soon lose. value.
As soon as the report came out, the price of USDT suddenly "flashed down" and fell below $0.88 in a short period of time, a drop of more than 11%.
After the plunge, the market's trust in USDT plummeted, and “whether or not Tether has sufficient margin to ensure USDT and USD 1:1 linkage” has become a hot topic in the industry.
On October 17, informed sources revealed that Tether's partnership with Noble Bank has ended and is discussing cooperation with Deltec Bank of the Bahamas.
On November 1, 2018, Tether announced that it had established a partnership with the Deltec Bank in the Bahamas and announced the bank's approximately $1.83 billion in assets. According to CoinMarketCap, the total USDT circulation was approximately 17.76. Billion.
Tether's report gave the investors at that time a "reassuring", and the panic that lasted for more than half a month eased.
However, there are still many people who expressed concern, saying: "The non-transparent stable currency has a big problem of trust. It is a time bomb that will bring a credit impact to the market at any time."
03 Industry V View
In response to this incident, someone on Twitter joked that the currency security now holds 782 million USDT, which needs more attention.
As can be seen from the previous interviews, Zhao Changpeng , CEO of the currency security company, believes that the stability of the currency is very important, "is a bridge to the cryptocurrency ." However, regarding the USDT view, Zhao Changpeng is relatively cautious and has released a number of stable currency trading volume data for users to refer to and choose.
We can see that the legal currency has experienced many sharp declines in history, and there have been more crashes than cryptocurrencies. Therefore, we have always expressed concern about Tether, which is one reason why we will put other stable coins. Now, we are actively promoting other stable currencies including True USD. ”
Regarding whether Tether has reserved a sufficient amount of US dollars in accordance with 1:1, at the beginning of last year, the industry's big V Zhao Dong said that there was "excess reserve" at that time:
For Bitfinex, this kind of event is not the first time it has been encountered. Shortly after the news came out, Bitfinex issued an announcement to deal with it, saying that the Office of the Attorney General of New York had maliciously written the document. Whether the incident can make more progress depends on the facts.
The USDT trend is closely related to the market conditions. In the short term, this event may generate some market volatility. Other stable coins with the same USDT issuance mechanism will also be questioned; however, due to the huge objective demand for stable currency, its issuance and Regulation of the use process is essential and will also exist for a long time.
Source: vernacular blockchain
『Declaration : This article is the author's independent point of view, does not represent the vernacular blockchain position, and does not constitute any investment advice or advice. 』