Recently, Tether’s general counsel confirmed that the Tether stable coin (USDT) is not 100 percent fiat backed.
This was disclosed in an ongoing case where the New York Office of the Attorney General (NYAG) accused BitFinex, a crypto exchange, for mishandling clients’ funds leading to a possible $850 million loss. Unfortunately, Tether’s reserves were used to cover up the loss. Tether Limited, USDT’s issuer, and BitFinex are both operated by iFinex, the firm that may have approved the illegal move.
Tether Changed the USD Backing Terms
Hoegner is seen to allude to the recent change of USDT’s fiat backing details on its website. The new information erased that USDT is fully backed by fiat and instead included that it can also be supported by fiat equivalents.
The controversy surrounding the two platforms elicited mixed reactions in the cryptocurrency community. For example, Yoni Assia, the CEO of eToro, a trading platform, said that the controversy is likely to impact the price of other cryptocurrencies like Bitcoin.
In a tweet, Assia noted “it’s bad news, but if $2B USDT get exchanged to BTC it actually increases its price… what a predicament.” The entire cryptocurrency market has already felt the pinch, shedding $10 billion when the AG intervened in BitFinex’s supposed cover-up on Apr-25.
The cryptocurrency community took to Reddit among other social media platforms to gauge the next course of action. For them, USDT should be thrown out of exchanges may be in reference to what another coin, BSV, was delisted due to its founder’s questionable behavior.
On Reddit, crypto_buddha posted:
“In light of Tether’s vast negligence, should the community call on exchanges to delist?”
The Crypto Community Respond
The responses were equally vast.
While contributing to the post, Redditors like Mbate22 opined that Binance, the leading crypto exchange, should be the first to de-list USDT. Mbate22 argued that the exchanges CEO, is “in a position to be judge jury and executioner. USDT gets delisted from Binance there wouldn’t be much chance of making a comeback.”
However, Throwawaylouisa countered cautioning that before CZ decides to de-list USDT, he must first list, if not already listed, worthy stable coins to take over its place.
“He’s in a position to be judge jury and executioner. USDT gets delisted from Binance there wouldn’t be much chance of making a comeback.”
Other Redditors indicated that the best way to follow through with USDT’s case is to “follow the community.” And from the community, the stand is changing with more of them now shifting from defending BitFinex and Tether to calling for the de-listing of USDT from major exchanges. A Redditor, Rudtjeban, was vocal saying:
“It’s sad to see how naïve some people are in the crypto community. IMO, doesn’t matter whether they believe BTC will go higher than $20K or lower than $1K in the next five years, they should agree that Tether is a shady business, and it should be delisted by big crypto exchanges. It’s harmful to the entire ecosystem”.
Even so, despite the imbroglio, he his bullish on blockchain:
“I’m personally bullish on blockchain technology but I will never make excuse for Tether’s wrongdoing by comparing it with banks, governments, etc. I mean, i have my own skepticism about banks or governments but we shouldn’t play whataboutism when we talk about what’s happening in crypto.”