A new busy week for bitcoin begins, with tether again as the protagonist. As revealed by the Bloomberg agency, the US Department of Justice is investigating the company that issues this cryptocurrency, which it says is equal to one dollar and is the most used in the world today. An investigation that adds to that of the New York Prosecutor’s Office, which fined its broadcaster, the Bitfinex exchange house, with 18 million dollars for irregularities in its accounts.
Tether appeared in 2014 as a way to exchange bitcoins on Bitfinex without having to use real money, thus avoiding the regulations imposed by the US Government, the Federal Reserve and the SEC on companies that buy and sell dollars. But the company needed to store the dollars it received and gave to users somewhere, even if all operations in the meantime were carried out with tethers. Precisely, the US Justice accuses Bitfinex and its subsidiary, Tether, of having deceived the multiple US banks with which it operated, such as Wells Fargo or Citibank, among others, hiding its real business from them.
The news came a few hours after the price of bitcoin skyrocketed, driven by massive sales of tethers on Binance, an exchange that does not accept dollars and only allows you to buy or sell bitcoins with tethers and other similar cryptocurrencies, such as USDCoin or BinanceCoin. . The sale on Sunday afternoon was so massive that the price of bitcoin shot up to 48,000 tethers per unit, which spread to other exchange houses that do accept dollars, where it jumped to around 38,000, where it remains this Monday.
For years, tether has been the currency used in most cryptocurrency operations: according to TheBlock data for this month, 64% of crypto exchanges are quoted in tethers, while the dollar only accounts for 12 % of operations, and the euro, 4%. On paper, since tethers are ‘worth’ a dollar, and almost all exchange houses accept it as such, there is no difference between operating with one and another within the cryptocurrency environment.
The problem is that there is no guarantee that the issuing company will be able to pay the equivalent dollar amount to tether holders if they ever want to sell them and get out of the game: in May, for more than 60 billion tethers issued until the date. The rest is in an unspecified “commercial paper” -short-term corporate debt- that would be equivalent to 3% of all debt issued by US companies currently in circulation, an unprecedented figure.
The other problem, of course, is that the vast majority of crypto users are trading a currency issued by a private company, which owns one of the largest cryptocurrency exchanges, and which . The huge sale of tethers a day before the announcement of an investigation into the company, at the very least, is sobering. It’s perfectly possible that there’s nothing wrong with all of this, but everything to do with tether has been stinking for some time now, and .
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