Tether no longer tethered to the dollar?
Social media users notice something odd on the Tether website
Stablecoins are classified as such because they are cryptocurrencies that are reportedly backed one for one to some tangible asset, such as gold or the U.S. dollar. Tether offered one of the first stablecoins, the USDT, which has been consistently met with cautious optimism or prudent negativism, depending on your point of view. Something strange has now happened behind USDT and it has the crypto community, once again, questioning the legitimacy of the stablecoin.
Since its inception, USDT has been described as being “100% backed by US dollars.” However, a visit to the Tether website now reveals something different. It states, “Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”). Every tether is also 1-to-1 pegged to the dollar, so 1 USD₮ is always valued by Tether at 1 USD.”
This can only mean that Tether is not holding an equivalent amount of dollars to match the amount of USDT in circulation. The ending statement, that “1 USDT is always valued by Tether at 1 USD,” only means that Tether values the USDT at 1 dollar – not that it actually has that value.
That is exactly what crypto was meant to overcome. Governments can arbitrarily raise or lower the value of their currencies, seemingly on a whim. If Tether is able to do the same with the USDT, it makes the stablecoin no better than government-backed currencies. This ultimately defeats the very purpose of offering a digital currency and does not bode well for the future of stablecoins.