Tether (USDT), the most popular stablecoin in the market, has released an update regarding how the company backs the USDT in circulation.
On its official website, Tether informs that their USDTs are 100% backed. However, are these funds backed 100% by USD in a bank account?
How Does Tether Back its USDTs?
According to Stripe’s Patrick McKenzie, Tether has updated the way in which they back the assets issued to the market. On Twitter, he uploaded a picture from Tether’s official site in which the company explains how they back every USDT.
The company says that every single tether is always 100% backed by their reserves. These reserves include traditional currency and cash equivalents and also other assets.
About it, the firm explained:
“From time to time, [Tether’s reserves] 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 USDT is always valued by Tether at 1 USD.”
Tether has an update, filed under Who Could Possibly Have Seen This Coming. pic.twitter.com/W7Xzw4TMjJ
— Patrick McKenzie (@patio11) March 14, 2019
As McKenzie explains, the company has always pretended that every tether was 1:1 backed by a deposit in a bank account in USD.
Individuals that owned Tether were sure that they had the equivalent amount of USD in a bank account. However, McKenzie says that the company abandoned this model and started backing their USDT with other digital assets.
Tether claims that it is solved if the firm is able to “pick the marks for receivables from related entities.”
This will add some more controversy to Tether, that has been accused several times of being used to manipulate the cryptocurrency market. Additionally, several users claimed that the firm lied about the funds it has.