May 21, 2019 Editor's Desk

Steven Redhead in his book ‘Life is a Cocktail’, has rightly said ‘Modern society has subsided into a culture of deceit’.

After years of unaudited promises about its reserve policies to the wider cryptocurrency community and its token holders, the truth about the stablecoin Tether has come out.

The papers filed by the company lawyers on April 30 confirmed that the company only has 74 percent of cash reserves of its total supply. Since Bitfinex which has overlapping ownership of Tether, allegedly used Tether reserves to pay for losses in 2018 they are facing a legal battle with New York Attorney General.

These papers being part of this legal battle ask a critical question that is Tether still a stablecoin?

Lawyers are saying that the company is maintaining a ‘fractional reserve’ the same as all the commercial banks do.

But, the truth is a coin to be stablecoin should 100 per cent backing. With anything less than that the company is acting like a fractional reserve bank.

Tether always has been a controversial topic in the cryptocurrency community for the last couple of years.


When it was launched in 2014, Tether gave a promise to provide the price stability that Bitcoin was lacking with a peg to the US dollar at a 1:1 ratio. Behind this the idea was that for every Tether issued, there was a dollar to match it in its bank reserve of Tether.

Just the thought of a cryptocurrency that could trade easily with fiat got people excited. Tether quickly became one of the most popular cryptocurrencies on the market.

However, some in the crypto community were skeptical and called for an official audit to see if Tether really had the fiat reserves they claimed to have.

Stablecoins are an attempt by crypto companies to offer the benefits of both worlds to holders. These coins are usually backed either by a fiat currency like the US Dollar or Pound Sterling or by any traditional assets like government bonds, commodities, etc.

Stablecoins usually are targeted towards traditional mind-set users who want to explore the crypto realm without taking any serious risks. Off late, the popularity of stablecoins is on the rise with giant business corporations choosing them as their native tokens.

JPMorgan, for instance, launched its stablecoin JPM Coin to facilitate cross-border transactions. Similarly, Facebook is also ready to launch its native stablecoin for payments.

The report stated, Samsung is among the biggest smartphone manufacturers in the world, with a presence in almost every country on the planet. On the other hand, social media giant Facebook has a user base of over 2.3 billion. These humongous numbers are enough to understand the potential of their foray into crypto and blockchain space.

The report also claims that companies like Facebook and Samsung are less prone to risks than traditional financial institutions. It added that these companies move at a faster pace, and that coupled with their large capital and human resources, could be just what the market needs to explode.

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