Tether
Tether is a controversial cryptocurrency with tokens issued by Tether Limited. It formerly claimed that each token was backed by one United States dollar, but on March 14, 2019 changed the backing to include loans to affiliate companies. The Bitfinex exchange was accused by the New York Attorney General of using Tether’s funds to cover up $850 million in funds missing since mid-2018.
Tether was called a stablecoin because it was originally designed to always be worth $1.00, maintaining $1.00 in reserves for each tether issued. Nevertheless, Tether Limited states that owners of tethers have no contractual right, other legal claims, or guarantee that tethers will be redeemed or exchanged for dollars. On April 30, 2019 Tether Limited’s lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents.
Tether Limited and the tether cryptocurrency are controversial because of the company’s failure to provide a promised audit showing adequate reserves backing tether, its alleged role in manipulating the price of bitcoin, the unclear relationship with the Bitfinex exchange, and the company’s apparent lack of a long-term banking relationship. Author David Gerard was quoted by the Wall Street Journal saying that tether “is sort of the central bank of crypto trading … [yet] they don’t conduct themselves like you’d expect a responsible, sensible financial institution to do.” Tether’s price decreased to lows of $0.90 on 15 October 2018 on speculation that investors are losing faith in the token. On November 20, 2018, Bloomberg reported that U.S. federal prosecutors are investigating whether tether was used to manipulate the price of bitcoin.
