Tether is the company behind the USDT cryptocurrency, designed to maintain a stable value, hence referred to as a stablecoin, with a fixed exchange rate of 1 USDT to 1 US dollar. Tether Limited is headquartered in Hong Kong.
To ensure the token's value, Tether Ltd is supposed to hold one real US dollar in reserves for every USDT issued.
Launched in 2014 as "Realcoin" by Brock Pierce, Reeve Collins, and Craig Sellars, it was the first stablecoin pegged to the US dollar. Initially issued on the Bitcoin blockchain using the Omni Layer protocol, it was later rebranded to USDT and expanded to other blockchains, including Ethereum.
Today, it is the most widely used stablecoin and the third-largest cryptocurrency by market capitalization, following Bitcoin and Ethereum.
However, its history has not been without controversy.
In 2015, Bitfinex was the first platform to support USDT. At that time, Bitfinex was believed to have no connection to Tether. However, the 2017 Paradise Papers revealed significant links between the two entities, including a shared CEO, Jan Ludovicus van der Velde.
Like many cryptocurrency-related companies, Bitfinex struggled to find banking partners. They eventually turned to Crypto Capital, a Panama-based firm, to which they entrusted $1 billion. The executives of Crypto Capital absconded with the funds, leading to a loss of $850 million for Bitfinex. In 2018, the New York Attorney General’s Office investigated Tether Limited and Bitfinex, uncovering that Tether had used its funds to cover Bitfinex’s losses. This raised concerns about Tether’s solvency, especially given the company's lack of transparency regarding its reserves.
Around the same time, investigators suggested that transactions involving Tether were used to manipulate the prices of certain tokens on Bitfinex and Kraken.
Issues of transparency, regulation, price manipulation, and money laundering have repeatedly surfaced over the years. In March 2023, US regulators accused Tether of using falsified documents to open accounts.
Despite these suspicions, USDT remains highly convenient for investors. It allows them to keep their cryptocurrency holdings without exposure to price volatility and facilitates international payments without the delays and constraints of traditional banks. Today, USDT is the most liquid stablecoin in the ecosystem.
Users have largely chosen to overlook the trust issues surrounding the company, favoring its practicality. Daily trading volumes of USDT often exceed $100 billion.
If the rumors are true and Tether does not have sufficient reserves to maintain the USDT peg, a panic sell-off by token holders could have catastrophic repercussions for the entire ecosystem.
To ensure the token's value, Tether Ltd is supposed to hold one real US dollar in reserves for every USDT issued.
Launched in 2014 as "Realcoin" by Brock Pierce, Reeve Collins, and Craig Sellars, it was the first stablecoin pegged to the US dollar. Initially issued on the Bitcoin blockchain using the Omni Layer protocol, it was later rebranded to USDT and expanded to other blockchains, including Ethereum.
Today, it is the most widely used stablecoin and the third-largest cryptocurrency by market capitalization, following Bitcoin and Ethereum.
However, its history has not been without controversy.
In 2015, Bitfinex was the first platform to support USDT. At that time, Bitfinex was believed to have no connection to Tether. However, the 2017 Paradise Papers revealed significant links between the two entities, including a shared CEO, Jan Ludovicus van der Velde.
Like many cryptocurrency-related companies, Bitfinex struggled to find banking partners. They eventually turned to Crypto Capital, a Panama-based firm, to which they entrusted $1 billion. The executives of Crypto Capital absconded with the funds, leading to a loss of $850 million for Bitfinex. In 2018, the New York Attorney General’s Office investigated Tether Limited and Bitfinex, uncovering that Tether had used its funds to cover Bitfinex’s losses. This raised concerns about Tether’s solvency, especially given the company's lack of transparency regarding its reserves.
Around the same time, investigators suggested that transactions involving Tether were used to manipulate the prices of certain tokens on Bitfinex and Kraken.
Issues of transparency, regulation, price manipulation, and money laundering have repeatedly surfaced over the years. In March 2023, US regulators accused Tether of using falsified documents to open accounts.
Despite these suspicions, USDT remains highly convenient for investors. It allows them to keep their cryptocurrency holdings without exposure to price volatility and facilitates international payments without the delays and constraints of traditional banks. Today, USDT is the most liquid stablecoin in the ecosystem.
Users have largely chosen to overlook the trust issues surrounding the company, favoring its practicality. Daily trading volumes of USDT often exceed $100 billion.
If the rumors are true and Tether does not have sufficient reserves to maintain the USDT peg, a panic sell-off by token holders could have catastrophic repercussions for the entire ecosystem.
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