Bloomberg: Bank Backing Tether (USDT) Refuses to Comment on Relationship
Tether (USDT), Cryptocurrency, Stablecoins–Just as the controversy surrounding the USDT stablecoin by Tether appeared to be subsiding, the company is now handling questions in relation to its partnership with recently announced Deltec Bank & Trust Ltd.
In a statement made on Nov. 1, the stablecoin company announced that it had an account with Bahamas-based Deltec Bank & Trust Ltd. worth $1.8 billion–the entire market capitalization backing the USDT coin. Accompanying the press release was a signed document, posted on Tether’s website in the form of a PDF, by the bank confirming the account and amount as reported by Tether. However, as Bloomberg points out, the letter is strikingly scant on details, with an ineligible signature that has no accompanying name or title designation.
When asked by Bloomberg for a comment upon their newly formed partnership with Tether, a venture valued at nearly $2 billion, the bank remained silent and refused to respond to inquiries. According to the story published by Bloomberg on Nov. 2, one day after Tether announced it’s new banking partnership, reports reached Deltec spokeswoman Melanie Hutcheson by phone, who then declined to confirm or deny whether the relationship held true.
Tether has been at the center of a nearly year long controversy involving the exact holdings backing the USDT stablecoin. The idea behind Tether is simple: rather than having a cryptocurrency that fluctuates on the free market through speculation, the coin provides investors stability in the form of pegging it’s value to the United States dollar. Therefore, each of the 1.78 billion USDT that has been minted and sold on cryptocurrency exchanges is supposed to be backed one for one by greenbacks. However, murky dealings over the exact nature of Tether’s holdings, in addition to several audits and other controversies that have failed to fully dampen investor skepticism, has led to the USDT coin standing on shaky ground.
While the currency is back to trading at near $1.00, its historical and purported value, USDT had slipped to 97 cents as market uncertainty led to the coin being traded for less than its claimed value. The risk for investors is either the market outright refusing to accept USDT for the claimed amount, whether through continuing uncertainty or frustration with the company’s handling of inquiries, or that Tether is revealed to be artificially propping up the coin’s value, thereby leaving investors holding the tab to pay.
Despite stablecoins continuing to climb in popularity and springing up in droves as the cryptomarkets shy away from the price volatility of traditional cryptocurrencies, the USDT coin appears to be taking a back seat despite holding the tenth largest spot by market capitalization. In October, EWN reported on the comments of Mike Novogratz in relation to development of stablecoins. While Novogratz, who has been a long time supporter of cryptocurrency and even bigger Bitcoin bull, holds a positive outlook for the industry of stablecoins, stating that the concept “makes sense,” he took fault with the way Tether has handled its transparency situation over the last year. According to Novogratz,
“Tether didn’t do a great job in terms of creating transparency.”
With recent inquiries into Tether’s new bank failing to produce tangible answers, it appears the USDT may continue to surround itself in market uncertainty heading into the final months of the year.