Stablecoin Tether is supposed to remain “pegged” to the dollar to provide traders a stable cryptocurrency. According to the company behind Tether, every token is backed by a real dollar, held in a bank account.
“Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD.”
But Tether made headlines earlier this year when concerns arose over the legitimacy of these claims. Despite promising regular audits, no independent audit has been undertaken to prove the underlying funds. Researchers at Texas University looked into it and concluded that tether backing is “incomplete.”
Background reading: Everything you need to know about Tether (the controversial stablecoin)
“Bank statements reviewed by Bloomberg News suggest those fears may be unfounded.”
Bloomberg has reportedly seen statements spanning four separate months that confirm tether is fully backed. The documents were revealed by someone with access to company records, and confirmed by government officials.
One statement confirmed that Tether held $2.2 million in its bank account at Puerto Rico’s Noble Bank Ltd. on January 31. At the time, there were 2.195 billion tether coins in circulation.
Statements in September and October also confirm that enough funds existed to back the circulation.
Not a complete account of Tether’s finances
Bloomberg admits the documents are not a complete account of Tether’s finances. For example, they don’t shine any light on where the funds originated from, only that they flow between Tether and crypto exchange Bitfinex. Tether and Bitfinex share an executive team.
Although the investigation may put some accusations to rest, Tether’s lack of transparency will continue to worry some traders.
Since the concerns dominated headlines this year, alternative stable coins have gained traction including Dai, Paxos Standard and Gemini Dollar.
Further reading: What are stablecoins? And how can we make them more… stable?