A thing I was very curious about when I was starting off with crypto was the use of stablecoins, as they just seemed like digital fiat. Over time I understood it more and more and saw it's usefulness especially when keeping fiat on exchanges as well as wallets was impossible in most situations. Eventually, I began to hear that one particular stablecoin was not to be trusted and how it's shady history and even shadier survival were a head-scratcher to a lot of people. Due to my recent interest in stablecoins specifically and a chance video coming across my Youtube recommended page, I dived into that which I had heard so much about. And I have to be honest...it is way worse than anything I ever expected to hear.
I can imagine, a lot of you reading right now have heard these rumors same as I have but may have never understood or cared enough to research it. Well, I did it for you and in this article I will essentially be doing a TL;DR of what I've learned in my research of the crypto with the largest trade volume in the world - Tether(USDT)
A note before I begin, if you want a more detailed explanation of what I'm about to talk about, this video here covers a lot of what I'm going to talk about here in a very polished and quality manner, so definitely check the video out if you have the time.
So let's start. I'm automatically going to presume that most of you have at least heard of Tether somewhere. If you have any crypto assets you should have seen it around or potentially even had part of your assets in it at some point. It's pretty hard to miss when it's what most exchanges use as a default fiat replacement so that you can keep your assets in a stable currency relative to the volatility of most others. Not to say that there aren't any alternatives, there are, fortunately, but you'd be mistaken if you expected to find any others more often than this one.
Where exactly lies the problem then if there are so many sites, apps and exchanges ready to take Tether on as a trading asset. Shouldn't something so popular be trusted and reliable? You'd be extremely right to think so, and most of these companies trusted Tether, this trust however was mostly due to it originally being the only of it's kind to exist, at least in 2014, and it was simply convenient to have, for everyone. It also promised that it was backed 1 to 1 by fiat (traditional currency) in their reservers and that it would always be equivalent to 1 $USD.
The thing with what I just mentioned is... the promise, they promised it would be so and with the moto of crypto being "don't trust, verify" that's already a bad sign. As expected, over time it has stopped being as they said it was. Let me show you how.
These are details of Tethers reserve that they were forced by the US court to release out in the open for the first time. And the way it's shown, you might not understand it but lemme try and simplify it a bit.
See, this right here is a better representation of their situation. Some of you might still be looking at this confused, so I'll just say it straight. Out of that 1 to 1 ratio they talked about, only 7% (and I'm being generous here) is actually traditional currency. This means that the ration is not 1 to 1, it is 1 to 0,07. Not only was what they originally stated a complete lie, they also changed their "definition" of the 1 to 1 ration, on their site, to something completely different after this was revealed, as if it was always that way. A simple way-back machine look will tell you what it used to say and how much it differs from the mass of text that stands in it's place.
Now, after this, you might still say, ok, they might not have all of their reserves as cash or it's equivalents but their price is still pegged to the dollar, the rest of that that isn't cash must be something else that is a tangible asset. And you'd be wrong, see, that 91% that I put as Absolutely not CASH is for the most part lent money, and this specific type of lent money is only given to very prestigious companies like Apple and Microsoft. Yet... we have no clue as to where this lending is going to. It almost definitely isn't going to those companies since why would they take them from Tether of all people and for what purpose even... Besides just not knowing who these "clients" are, which is bad in itself, these "clients" could be anyone on the planet and is therefore quite likely, not a prestigious company.
But okay, okay, maybe I'm completely wrong about that, and so is everyone else and it's all just been done to stop Tether from being at the top where they deserve to be. There must be some transparency there other than the pie chart I just showed you. But there really isn't, besides the occasional nitpicked stat we are given by the developers, any other attempt to get more transparency, through legitimate means, has gone unanswered. So much so, that in 2018, when they were supposedly allowing an audit of everything they were doing to show they were clean and trustworthy, they stopped it from going through. Why? Because "the auditor was being too detailed when reporting on his findings for something that required simple explanation, therefore it was taking too long to finish and wasn't going to be completed". No sketchiness involved there... none at all. After that they had someone else take a theoretical "peak" into their financials and just give the proverbial thumbs up as if it would be that easy. This attempt was flagged multiple times as not complying to the standard rules of auditing and examination that every other company would have complied to.
In a more recent example, during a Q&A with one of the owners of Tether, the question of when will an audit be finished was answered with "it should be done in a few months time" showing even more avoidance of the topic. And seeing as the audit was promised way back in 2018... 3 years is just a bit too long to wait for something like that, I'd say.
Continuing from that, the team must be a trustworthy bunch of enthusiasts right? Nope, not at all, a better name would be a cabal since most of the top ranking officials were at some point jailed or prosecuted for various offenses with most of them either being connected to Ponzi schemes, pyramid schemes, fraud and even child pornography... For more details on each, just search their names on google.
Let's not stop the train there as the exchange where USDT was originally used, Bitfinex, which was also the largest exchange in the world at one point is owned by the same exact group as the owners of Tether. This in essence allowed them to infinitely print USDT whenever they needed it to pay off any debt or losses that they had on the exchange. This very thing got them into hot water and a settlement with the state of New York which banned it's use in the state this year. As you can imagine, this type of case has now gone national as Tether is now being criminally probed for bank fraud.
How has USDT gotten through all of this if it's as guilty as I'm detailing? The simple answer is money. Tether was supposed to be minted only when someone exchanged fiat for it, however, due to how the terms of service for Tether were written, it was possible for the company to never actually burn the Tether that was no longer in use if someone returned it to fiat, it could just remain in existence despite it not actually having a $ to back it up. This was therefore basically just printing money and that money has gone into the previously mentioned lawsuits, near-bankrupcy and many other problems they have faced up until now.
If all of what I just mentioned hasn't gotten you to stop using it, than I recommend you do your own research besides what I just told you. Maybe I'm just lying without any good sources to quote, but I'm quite sure that people that have read my articles before know that I do not spew FUD, like ever, I only write about thing that are factual and have been researched thoroughly so that I as well as my readers can be sure of whatever it is I'm talking about.
If you now see what a danger Tether is for the whole of the crypto world I would recommend holding assets in Dai or USDC. That is if you were planning on using a stablecoin, otherwise just don't use Tether...cause when the shit hits the fan, you'll be thankful there was no USDT in your portfolio.
However, I can not make someone that is a firm believer in USDT think otherwise, and it's not my job, I just wanted to show some of you guys that may not know about USDT's shady handling, what's happening under the hood of one of the biggest cryptocurrencies out there...
Thanks for reading, I really hope it was helpful or that it inspired you to do some digging of your own.
