In an affidavit filed by Tether’s general counsel, Stuart Hoegner, tether has a 74 percent backing against the USD. This is contrary to what its issuer, Tether Ltd, has maintained over the past year that the stablecoin has a 100 percent backing against the dollar and other cash equivalents.
However, Hoegner’s revelation is just a confirmation since Tether recently adjusted details on its website excluding the ‘fully fiat backed’ section. Hoegner is also the general counsel of Bitfinex, a digital currency platform that has been accused by the New York Attorney General (NYAG) for the loss of $850 million investors’ funds.
The AG Should Not Expect a 100% Backing
Another lawyer helping Tether fight the AG’s claims, Zoe Philips, indicated that it is not a must for Tether to “hold $1 in cash fiat currency for every dollar of tether.” Tether and Bitfinex are operated by the same firm, iFinex, which is also at the center of the controversy.
Interestingly, although Tether and Bitfinex are separate entities, or so they say, their credit agreements were signed by the same person.
Since Hoegner’s filed the affidavit, the cryptocurrency community has been divided on whether Tether needs to maintain a 1:1 ratio with USD held in a bank account (s).
While drawing a comparison of what 74 percent backing means, a Twitter user BTC_Macro tweeted:
“If I gave you a car and told you that 1 out of 4 times the breaks wouldn’t work, would you still drive it… If you’re still in tether, you’re f*****.”
Tether holdlers weren’t comfortable with this example with Sevag2311 tweeting:
“Wells Fargo deposits: $1,306,079,000,000; Wells Fargo cash on hand: $20,729,000,000; cash to deposit ratio: 98.41% of deposits not covered.”
Some even viewed it as a double standard on the side of the regulators since banks have less backing on deposits than tether.
However, regarding the claims that Bitfinex used tether’s reserves to hide the loss of client’s funds, tether is without a doubt in a mess.
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