In what seems like yet another round of controversy, the co-founder of the most popular stable coin Tether (USDT), William Quigley, said that it wouldn’t matter if the cryptocurrency is actually backed by the US dollar as long as everyone agreed to value USDT at a dollar. Following this chain of thought, however, puts Tether in the same basket as most fiat currencies that are not backed by anything.
Controversy At Its Best
USDT is the most popular and most widely used stable coin on the cryptocurrency market. According to its official website, every single tether is always 100% backed by the company’s reserves, including “traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties.”
As Cryptopotato reported, this definition came after a silent update in the company’s website, which raised serious doubts about the stable coin’s dollar peg. The previous statement used to read that “every tether is always backed 1-to-1 by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD.”
As if this wasn’t enough to fuel the flames of doubt and uncertainty around the already popular stable coin, William Quigley built upon it in a recent interview for Bloomberg.
Whether or not Tether was backed by the dollar actually wouldn’t matter if everybody agreed to take Tether and to value them at a dollar themselves.
He also pointed out the controversy surrounding the company when the NYAG started an investigation, alleging that Bitfinex (Tether’s sister company), covered up an $850 million loss by accessing at least $700 million worth of the $900 million in USDT tokens from Tether’s reserves. Quigley said that despite Tether not being able to access those $850, the price of USDT remained stable at $1, suggesting that this is what people valued it at.
But that’s an issue because Tether’s dollar peg is what gave it the name “stable coin” in the first place. It’s supposed to be backed by the USD because that’s where its “stable” value comes from.
Tether Goes Another Round
The fact that one of Tether’s co-founders openly says that it wouldn’t matter if USDT is backed by the USD or not is alarming, to say the least.
Removing Tether’s dollar peg would make the cryptocurrency nothing but a speculative digital asset with absolutely no actual value and use case. It would turn it into mere speculation and, as we know, the cryptocurrency market itself is highly speculative and incredibly volatile. Stable coins are what people turn to in order to hedge their investments in times of violent price swings and if we remove the dollar peg, they’d be practically useless.
This reminds us of traditional fiat currencies that the crypto community is traditionally positioned against. Most of them are backed by nothing and we can already see the consequences of that. Countries such as Venezuela saw their national currencies severely devalued.
In 2019, for example, the Central Bank of Venezuela calculated that the annualized inflation rate in 2019 was 282,973%.
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