google.com, pub-6663105814926378, DIRECT, f08c47fec0942fa0 The Cryptocurrency Tether, More Used Than Bitcoin, Raises Suspicions That It Is a House of Cards 4289

The Cryptocurrency Tether, More Used Than Bitcoin, Raises Suspicions That It Is a House of Cards

- Its cash reserves are the same as in 2019: 2,100 million
- In this time, they have issued coins in the tens of billions
- In theory, they should have both cash and tethers issued

It is one of the great unknowns, but the oil that greases the world cryptocurrency market. The tether, a digital currency whose value is theoretically fixed at one dollar, is the key that keeps all the others alive. Its stability is based on the claim that, like other currencies with a fixed exchange rate, the company that issues it has an equivalent amount of dollars to back the more than 57,000 million tether issued. But doubts have been triggered after this Thursday it published for the first time a very summarized extract of its reserves, which indicates that it only saves about 2,100 million in cash, just over 4% of its total assets.

This currency, whose main use is to replace real dollars in most bitcoin trading transactions in the absence of real liquidity, is the most widely used cryptocurrency in the world. In the last 24 registered it had more volume of movements than the other 10 cryptocurrencies in the top 10 (such as bitcoin, ether, dogecoin, etc.) combined: 183,000 million compared to the sum of 181,000 million of the other 9 most used.

At first, iFinex, the creator of this 'stablecoin' back in 2015, promised that it would save a dollar in its accounts for each tether issued, and that all it did was create these tokens to operate more easily in exchange houses of cryptocurrencies. However, a few years later it changed its terms of use to clarify that it was not obliged to exchange tethers for dollars, so the path is one-way: a user can put in dollars, but not if one day he will be able to withdraw them.

And the summary of his balance sheet, which he presented this week, leaves considerable doubt about his ability to pay back dollars, even if he wanted to. Although next week he will have to present a detailed balance by order of the New York Prosecutor's Office , Tether has advanced the holders of his reservations. Specifically, to back the 41,000 million tethers it had issued at the time it made the balance - since then they have issued an additional 14,000 million -, it has $ 1,200 million in cash and $ 900 million in US Treasury bonds, a figure lower case.

Most of your funds are invested in much more dubious concepts. Almost half, about 20 billion, were in "commercial paper", that is, short-term loans from unspecified companies. Without it being Amazon or Exxon, they would be practically cash. If they are to other exchange houses and cryptocurrency companies, it would be very reminiscent of when Enron obtained loans from companies that depended on Enron itself to exist, multiplying the risk of default instead of reducing it.

Added to that are 7.5 billion fiduciary deposits, a mechanism that allows money to be deposited in a third bank through an intermediary entity that hides the identity of the real owner of the funds, without giving more details of which banks those are. Another 5,000 million are in collateralized loans, without giving more details, and 4,000 million are in "corporate debt, funds and precious metals", without explaining their percentages. And another 600 million are invested in cryptocurrencies.

Finally, 1.2 billion are in "reversed repo notes," a term that does not exist. Yes there are repo, "repurchase agreement", a mechanism to obtain emergency liquidity in which a bank buys an asset from an investor with the condition of repurchasing it in a very short period of time, of days, paying a higher price as a form of interest. . And there are the "reverted repo", in which the investor is the one who buys the asset to resell it. But the "repo notes" are not recorded in any kind of investment dictionary.

Under the gaze of Justice
Last February, Tether reached an agreement with New York Attorney General Laetitia James to present her balance sheets every three months for two years. The Prosecutor's Office found evidence that iFinex, the issuing company of the tether and owner of the Bitfinex exchange house, had repeatedly failed to fulfill its promises to keep the same amount of cash as the issued tethers, and had used the dollar reserves to send loans to other companies in your group. In 2019, when asked by Justice, the company's lawyer, Stuart Hoegner, acknowledged that they only had 2,100 million in cash or equivalents, 74% of the tethers in circulation at that time, and coincidentally the same figure that this has given. week, despite the fact that the issuance of this cryptocurrency has skyrocketed in this time. Next week,

The importance of tether is key in the cryptocurrency market for two reasons. On the one hand, as has already been said, it provides liquidity to the system: more than 70% of bitcoin operations are carried out with tethers, according to the most recent data from exchange houses, so without this currency, the system it would be vulnerable to higher price movements and possible bank panics.

But, and more seriously, critics denounce that iFinex is issuing unbacked tethers, basically fake dollars, with which to artificially inflate the value of the coins. If no one controls where that money comes from, no one can prevent iFinex from creating tethers out of thin air and buying bitcoins with them, causing hyperinflation in the price of the coins , which it then sells for real dollars. A suspicion that their balance sheets do little to rule out.

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