Blockchain News

Tether Slashes Commercial Paper to Zero, Adding Credibility to USDT

With the cryptocurrency world and its prominent players moving towards more significant changes, updates, and improvements as 2022 comes closer to its ending, Tether has also accomplished its goal.

On October 13, 2022, Tether announced that it had removed all of its commercial paper holdings from its reserves and replaced them with US Treasury Bills (T-Bills) investments. This declaration is made as part of continued efforts by Tether to promote transparency, with the protection of investors being the primary focus of the management of Tether’s reserves. 

How Does This Impact Tether and the Stablecoin Industry?

Tether has demonstrated its dedication to backing its tokens with the safest reserves available on the market by reducing the number of commercial papers it holds to zero. Not only for Tether but also for the whole stablecoin industry as a whole, this is a step towards increased transparency and trust in financial transactions.

Tether has been at the forefront of the market regarding transparency, publishing attestations once every three months and analyzing the components that make up its reserves. Tether has been continuously reducing its exposure to its commercial paper holdings over the most recent quarters without incurring any losses. On July 1, the Company provided an update on its success in further decreasing its commercial paper portfolio to a low of $3.5 billion, which was in line with Tether’s commitment to the community and was discussed in the previous update. On September 30, the business announced that its holdings of commercial paper had dropped below $50 million.

Considering all this, it’s viable to say that Tether accomplished the objective of bringing the number of commercial papers down to zero in 2022.

Tether Overview: A Popular Stablecoin

Tether’s primary objective is to offer a digital asset that is both “secure” and capable of sustaining a constant value. Because of this, USDC is considered a stablecoin because its value is fixed relative to that of the US dollar. The aim is for Tether’s value to remain constant relative to its peg at all times.

Steve Bumbera, chief operating officer of Many Worlds Token, also made a statement about the stablecoin’s vision: “The concept is that 1 Tether can always be sold for $1, regardless of market conditions.” 

The USD Coin (USDC), the Dai (DAI), and the Pax Dollar (USDP), to mention a few, are some of the stablecoins that Tether’s competitors include.

Cryptocurrency traders use Tether as a source of consistent and reliable liquidity. This allows them to enter and exit other cryptocurrency trades without the risk of unforeseen losses (or gains) resulting from price fluctuations.

In fact, by the 13th of this month, the 24-hour trading volume for Tether was $89 billion. As a result, Tether is the most liquid cryptocurrency, surpassing the likes of cryptocurrency market veterans Bitcoin (BTC) and Ethereum (ETH). In terms of market value, it is also one of the top three largest cryptocurrencies.

As Tether’s Dominance Declines, New Players Emerge

The volatility of crypto assets’ values has always been one of the roadblocks for their widespread adoption. To solve this issue, the first stablecoin was born — USD Tether. Soon after, as the reputation of USDT grew in scandals, many new alternatives started emerging in the market. In fact, there are more than 57 new arrivals, according to a recent report by Blockchain.

What exactly are stablecoins and how do they help?

The simplest way to put it is that a stablecoin’s value is pegged to a stable asset, such as US Dollars, Euros, gold, or other assets with stable values. They represent safe heaven for crypto investors’ portfolio holdings in the case of a market crash as we’ve witnessed in the past year. Not all stablecoins are the same, though.

There are various types of stablecoins, depending on what keeps their price stable. The report from Blockchain summarizes them in two main categories — asset-backed and algorithmic. As the name might suggest, the asset-backed stablecoins are mostly centralized and backed by fiat, cryptocurrencies, other stable assets, such as gold and silver. On the other side, algorithmic stablecoins, also known as seigniorage-style, are decentralized by nature and rely on no real-world collateral. Instead, the value of the coin is determined solely by its algorithm.

The fiat-backed stablecoins solve the volatility challenge by pegging one-to-one each coin with a certain amount of some stable asset. An example would be Tether, each USDT is backed by $1 or so they claim. Algorithm-backed cryptocurrencies seek to solve this problem by controlling their money supply through monetary policy. Basically, they rely on the software to adjust the available coin supply on the market, essentially ensure its price remains stable. One could argue that algorithmic stablecoins are technically digital central banks.

USDT: Clouded in mystery

Until recently, the predominant player in the game was USD Tether, initially known as “Realcoin.” As the coin and the company behind it have been in many scandals throughout their short lifespan, people began to ask questions and dig deeper into. After the most recent dispute at nearly $3 billion market cap, Tether’s total supply, and market dominance began to decline as a clear contrast to its competitors’ rising circulating supply. Right now, the market cap of USDT is about $1.8 billion.

Beyond USD Tether: A More Stable Future?

As the dominance of USDT declines, new players enter the game. According to data from The Block, the most used stablecoins after USDT are TrueUSD, USDC, PAX, followed by Gemini Dollar and Dai. While TrueUSD has been around for a while, other more recent coins, such as USDC, issued by Circle, and PAX have grown at a much faster rate.

Unlike Tether, some of these new market entries comply with certain regulations to ensure their safety. Some of the requirements that projects, who have acquired permission from the New York Financial Regulator to launch a stablecoin, such as PAX and Gemini Dollar, will include strict recordkeeping and monitoring as well as adopting “risk-based controls.” These requirements prevent money laundering and various other illicit activities.

Recently, Binance, one of the cryptocurrencies’ biggest exchanges announced they would be creating a new stablecoin market, essentially renaming their USDT section to USD? and adding new stablecoins as base pairs for trading. One of the platform’s newest entries is namely PAX.

Tether announces a letter of attestation attributed to Deltec Bank

On Thursday, Nov. 1, Tether released a letter attributed to Bahamas-based Deltec Bank, stating that, as of the end of Oct. 31, 2018, ‘Tether Limited’ owns an account with a ‘portfolio cash value’ of $1,831,322,828. According to a Bloomberg publication, so far, the bank has declined to comment on the claim.

After months of FUD, weeks of declining USDT circulation and market cap, a purge of assets, and various rumors — this bank attestation appears to be raising further concerns rather than taking care of existing ones.

Deltec’s ‘due diligence review’ of Tether Limited’s assets

According to the statement on USDT’s website, to become the bank’s customer and acquire the presented bank attestation, Tether had to and will continue to undergo a long due diligence review of their portfolio holdings.

As mentioned in the publication, the review included a complete background check of Tether’s shareholders, ultimate beneficiaries and executives, a full analysis of their processes, policies, and procedures for compliance, as well as an affirmation of the 1:1 USD-peg claim.“The acceptance of Tether Limited as a client of Deltec came after their due diligence review of our company. This included, […]. This process of due diligence, was conducted over a period of several months and garnered positive results, which led to the opening of our bank account with this institution. Deltec reviews our company on an ongoing basis.”

Signature, but no name?

Neither the name or position of the company executive whose signature is on that bank attestation, are known. Some critics have even gone out to compare the statement to a similar one from Marmota Bank, and their style of writing appears to be quite similar.

According to Bloomberg, Deltec spokeswoman Melanie Hutcheson has refused to confirm or dismiss Tether’s claims when contacted via phone a day after the publication.

 

USDT’s market cap descent

As of the time of this writing, USDT market cap has plunged from over $2.8 billion to below $1.8 billion since mid-October. This bear market was set off by a sudden decline in Tether’s price to below $0.90 on some exchanges. The drop, totally unexpected for most, promoted panic among the unsuspecting holders and traders, leading to a sell-off.

On Oct. 24, Tether announced the purge of half a billion USDT, leaving their treasury fund with about 466 million. Actions such as this one have left some critics to speculate whether the reduction in supply was intended to ensure the success of Deltec Bank’s due diligence review.

The Raven’s Dispatch – The Week in Cryptocurrency – June 21, 2018

BITHUMB HACKED – $30 Million in crypto lost

“Just when I thought I was out, they pull me back in!” Just when we think the bulls are gathering the troops, the hackers (and exchange) bring us back down. One of the largest exchanges in the world, Bithumb, based in South Korea was recently hacked for $31 million. How did that affect the Bitcoin price? Not much. We are still holding that $6000 support, fam.

The top 5 in terms of marketcap remains unchanged but all showed weekly growth as per the Livecoinwatch image below. The overall cryptocurrency market in the past week increased from $279bln to $289bln representing a 3.5% increase in the past seven days. Your bags are not the only ones suffering. EOS is the only in the top 5 which did not recover as well week to week, likely to do with the news of the “constitutional crisis” their block producers are having.

Bitcoin:  BTC dropped 4% to $6772 in the past week as of this post. Even with the news of the Bithumb hack Bitcoin held that strong $600 support and showed signs of life. How many more Bart patterns are we going to see this year? It wouldn’t surprise me if “The Bart” becomes an accepted crypto technical analysis pattern in the future.

Ethereum: Aaaaand it’s back. Or is it? ETH grew 10% over the past week settling at $537 as of this post. I don’t really see many people saying “buy ETH at $500, you will never see it again” on the social media anymore. I wonder why?

TETHER (USDT): Tether is back in the news this week so we figured we would highlight it in this weeks Dispatch. The idea behind Tether to have each USDT token backed 1:1 by USD reserves. By holding a US dollar for every USDT Tether token, Tether claim that the value is pegged to the USD and will remain stable. The very definition of a stablecoin.

This is great for people looking to secure profits from their holdings, and even better for day traders – nobody wants to profit by exchanging one coin for another only to see both plummet in value. This is great idea, unfortunately the lack of transparency from Tether itself has many doubting each token is backed by a US dollar.

There is not much in terms of price to discuss, because Tether should never deviate from it’s value of $1. That’s not the case as you can see below. USDT has deviated from it’s 1:1 pegging of the dollar, most drastically when it came onto exchanges in February 2015 and again between April and June 2017.

What’s new at Crypto is Coming

Square Granted Bitcoin Trading License – Payment processing company Square has been granted a New York BitLicense, which enables them to operate a cryptocurrency exchange and allow New York residents to trade Bitcoin.

Law firm Freeh, Sporkin & Sullivan LLP (FSS) confirms Tether fully backed by USD – The often criticised and controversial company Tether shared a “transparency update” via twitter yesterday.

Total Dominance: The Story of Binance – The exchange has seen meteoric growth, reaching the highest volume of any exchange just six months after launch and valued at almost $2 billion within the same time frame, making it the fastest ever platform to reach ‘tech unicorn’ status.

Crypto Facilities To Launch Litecoin Futures – UK cryptocurrency exchange, Crypto Facilities, is set to launch Litecoin derivatives contracts from Friday, June 22, according to rumours. The exchange will be offering both short and long positions with weekly, monthly, and quarterly maturities for LTC joining Bitcoin (BTC) and Ripple (XRP) futures. The exchange also added Ethereum (ETH) futures last month.

Underdog EOS Block Producers you should root for – The purpose of this piece is to highlight some of the best candidates at risk of not getting enough votes to earn a spot, and why you might want to support them with your vote, to have a more decentralised and stronger EOS network.

EOS BPs heavily controlled by exchanges (2 from Huobi) and other potential issues – Adding to our recent series of posts on EOS, Nic Carter did a quick recap of the current 21 EOS block producers filtering them by organization, % of stake, affiliation with any cryptocurrency institution, geographical legal jurisdiction. Makes sense to vote for those underdog BPs, eh?

EOS leaving exchanges vulnerable to hacks? – Whoa, that’s a lot of heat for EOS  aint it? Crypto enthusiast Emin Gun Sirer put up an interesting thread today on twitter predicting a massive exchange hack in the next 12 months….all because of potential EOS vulnerabilities.

Is this the cryptopocalypse? Visualizing historical BTC corrections – Check out this visual from the crew at howmuch.net. An easy way to put things in perspective and calm your nerves.

Tezos Refusing To Relinquish Funds Unless Customers Reveal Their Identities – Say what?! Tezos, a much-anticipated smart-contracts platform aiming to rival Ethereum with added features such as self-governance, is holding user contributions to the ICO hostage pending completion of KYC (Know Your Customer).

How money flows into and within Crypto (cool visualization) – Cool visual representation of how money flows in cryptocurrency from coinlib.io. Really easy way to view how money comes into crypto from fiat currencies and how it moves within the ecosystem once it’s there.

What Is A Mainnet Launch and which upcoming launches should you keep an eye on – We have a look at what is a Mainnet, why it matters for your investment and the upcoming mainnet launches you should keep an eye on.

How cryptocurrencies compare with Visa and Paypal – This graphic shows how the top cryptocurrencies (by marketcap) compare to VISA and PayPal in terms of transactions per second.

Explaining Augur for Beginners (infographic) – Augur is highly touted project in the cryptocurrency industry. With its launch date approaching, we decided to take a closer look at how the platform actually works. At it’s core Augur is a prediction market built on top of the Ethereum Blockchain.

Bitcoin ATMs around the world (visualization) – Are there any Bitcoin ATMs in your neck of the woods?

Interview: Gregor Zupanc – DAA Fund Manager at ICONOMI – If you haven’t already, check out our latest interview of ICONOMI DAA fund manager Gregor Zupanc. Get some insight into how they select which crypto to include in their fund Solidum Capital.

Bitcoin hash rate spiking to all time high…despite price slump – Miners don’t seem to be worried about the price in the short term with new entrants continuing to enter the market.

Cryptocurrency news from around the internet

Korean crypto exchange Bithumb says it lost over $30M following a hack – Just weeks after Korean crypto exchange Coinrail lost $40 million through an alleged hack, another in the crypto-mad country — Bithumb — has claimed hackers made off with over $30 million in cryptocurrency.

Bitcoin Is Controlled by China, Won’t Disrupt Banks: Ripple CEO – Wow, salty much? Since Coinbase announced Ethereum Classic (ETC) would be the next available coin on their platform the Ripple CEO has been on angry fit.

Here’s why EOS will confiscate your tokens if you HODL for too long – Bad news keeps rolling in for EOS.

Goodbye, Denver Post. Hello, Blockchain – They left The Denver Post amid newsroom layoffs and interference in the editorial process by the newspaper’s hedge-fund owners. And now those reporters and editors are creating their own news outlet, The Colorado Sun.

Research: Tether, Bitfinex ‘Manipulation’ Reason Behind 2017 Bitcoin Price Highs – EOS and Tether can’t catch a break this week. Tether (USDT) has once again become the source of criticism after a new study blamed it for Bitcoin price manipulation in 2017, The New York Times reports Wednesday, June 13.

‘Evolve & Adapt’: Goldman Sachs May Trade Cryptocurrencies, Not Just Futures – My, my, my how times change…In less than 6 months. Investment banking giant Goldman Sachs is getting more serious about launching a full-scale cryptocurrency trading operation.

29% of High Net Worth Individuals Have a High Degree of Interest in Crypto – Capgemini’s 22nd annual World Wealth Report, which tracks investment trends of high net worth individuals, found that more than half of those surveyed have at least some interest in cryptocurrencies.

Nasdaq CEO says ICOs are ‘taking advantage’ of retail investors – Initial coin offerings have serious potential to rip off retail investors, mostly due to a lack of public information, according to Nasdaq CEO Adena Friedman.

‘Selling Crypto Now Is Like Selling Apple in 2001’, Says eToro CEO – Just #HODL

Walmart wins patent for medical records stored on blockchain – Walmart has been awarded a patent for a system that would store a person’s medical information in a blockchain database and allow first responders to retrieve it in the event of an emergency.

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law firm Freeh, Sporkin & Sullivan LLP (FSS) confirms Tether fully backed by USD

The often criticised and controversial company Tether shared a “transparency update” via twitter this morning. They announced that earlier this year Tether engaged the law firm Freeh, Sporkin & Sullivan LLP (FSS) to review bank account documentation and perform random inspections of the corresponding Tether in circulation and reserves. FSS, who Tether says was granted authorization to perform an unlimited number of examinations of these bank accounts, was also in contact with the institutions directly and reviewed all of the available documentation. Before submitting its review and report, FSS conducted in person interviews with Tether personnel including Chief Compliance Officers as well as operations management.

In Total, over $2.5 billion USD was accounted for. The full report is available here.

Rounding out the announcement, Tether acknowledged a lack of “engagement” with the greater community and vowed to improve upon this in the future.

TAKEAWAYS

While not an audit per se, this should definitely calm down at least some of Tether’s critics. They’ve maintained form day 1 that all circulating USD Tethers are backed 1:1 by USD reserves. It’ll be interesting to see if a full audit will be released at some point during 2018. Tether has been an important and crucial part of the on-boarding infrastructure from Fiat currencies to Bitcoin.

 

 

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