Tether's Billion Dollar Reserves May Not Equate to 'One-to-One Backing' or 'No Misconduct'

On Dec. 18th, Bloomberg reported that "Crypto-Mystery Clues Suggest Tether Has the Billions It Promised," citing statements that span four months of cash held in Tether's dollar reserves.

These new findings by Bloomberg do not expunge Tether from potential misconduct or alleged market manipulation.

"One statement shows $2.2 billion was in Tether's account at Puerto Rico's Noble Bank Ltd. on Jan. 31. That same day, 2.195 billion Tethers existed."

These claims could suggest Tether really is backed one-to-one by dollars, calming the overwhelming skepticism around Tether's marketing claims.

According to the study, if Tether was pushed onto exchanges rather than demanded by investors with dollars in hand, then Tether may not be fully backed by dollars when issued.

Even if the snapshots of Tether's bank accounts might indicate that the company has the reserves it claims, that is not sufficient evidence to prove the origin of those coins, the activity the coins have been engaged in, or that backing is continued through the entire month prior to a bank statement.

"Tether's 'real supply' has been contracting, even though it has not done an on-chain supply revocation since January. Assuming Tether and Bitfinex are the same entity, Tether has been 'redeeming' its own tokens, including over 130M in the last 24 hours and over 740M in October, by receiving tokens in its treasury account from a Bitfinex account."

Although banks are typically risk-averse, especially to cryptocurrency companies, it still appears that Tether and Bitfinex have had an unusual amount of trouble securing a reliable banking partner.

Bitfinex, one of the world's largest crypto-exchanges, is closely related to Tether Ltd. Both Hong Kong-based companies share the same management team, and Bitfinex is one of the few official places where USDT is sold and redeemed from Tether Ltd. With that information in mind, Tether is able to function as a pseudo-bank, since these exchanges are often unable to gain access to reputable banking services.

Since the cryptocurrency market is highly dependent on Tether, a faltering-or worse yet, a collapse-of Tether would be catastrophic.