Tether ($USDT.X) is the world’s largest, biggest, and most traded USD stablecoin. If you are reading this Litepaper, it is assumed you know what Tether and a stablecoin are. But to avoid making an ass out of you and me, here’s a quick definition of what a stablecoin is:
A stablecoin is a cryptocurrency pegged to another instrument’s value. That instrument could be a commodity, property, stock, or fiat money. In the case of Tether, it’s pegged to the U.S. Dollar.
Theoretically, every USDT is backed by a real dollar held by the stablecoin issuer, Tether. At least, that’s what Tether claimed.
Tether got into some big doo-doo with the CFTC in October 2021 and had to pay a fine of $41 million for lying to the agency and customers about how USDT is backed. A real USD did not back every USDT. Tether also lied about being audited by third parties.
Fast forward to today, and Tether doesn’t claim that 100% of USDT is backed by USD. Instead, it is backed by Tether’s reserves. So what are Tether’s reserves made out of?
Who the hell knows. Tether is not exactly a glowing beacon of accountability and transparency.
The image above is from the independent accountant’s report from accounting firm MHA Cayman, which confirmed Tether’s unaudited Consolidated Reserves Report.
$82 billion in assets, with $20 billion backed by commercial paper (rumored to be mostly Chinese) and $39 billion in U.S. Treasury bills. And a whopping (insert sarcasm) $4.1 billion in cash and bank deposits.
Not exactly $1 for every USDT that exists. Read the full report here.
USDT lost its peg to the USD for an extremely short period during the collapse of Terra’s stable-lol-coin, UST ($UST.X). Tether’s CTO confirmed that hedge funds attempt to short USDT into the ground, a story confirmed by crypto broker Genesis.
Does the recovery of Tether prove it’s legit? That’s for you to decide. Regardless, for better or for worse, it looks like USDT is here to stay. 🤔