Tether is yet to come clean on its alleged involvement with Bitfinex exchange and issuing USDT tokens which are alleged to have been not backed by the U.S Dollar.
There has been a mounting suspicion within the crypto community over the controversial relationship of Bitcoin exchange Bitfinex with startup Tether who is the issuer of dollar-linked USDT tokens to several exchanges.
Many analysts in the market have alleged that Tether has been issuing extra tokens to Bitfinex without actually backing them with the U.S Dollar, and the exchange has been using those tokens to manipulate and control the price of Bitcoin.
According to the latest report by Bloomberg, U.S regulators are closely monitoring every move of Bitfinex and its operations. The report says that the U.S Commodities and Futures Trading Commission had sent subpoenas to both the companies – Bitfinex and Tether – last month on Dec. 6, 2017.
Erica Richardson, a CFTC spokeswoman, in an emailed statement to Bloomberg, said: “We routinely receive legal process from law enforcement agents and regulators conducting investigations. It is our policy not to comment on any such requests.”
As on Tuesday, Jan. 30, 2018, Tether claims to have a total of $2.3 billion worth USDT tokens in the market with each outstanding token being backed by the U.S Dollar on 1:1 basis, and are held by the company in its reserves. But with the growing suspicion in the market, analysts have asked Tether to come clean on this matter and have a third-party uninterrupted audit. However, Tether has yet not responded anything to substantially back its claims.
There has also been an increasing skepticism in the market about Tether’s issuance of its USDT tokens. The skepticism within the crypto community started growing when Tether released a massive amount of tokens worth 50-100 million, especially at a time when there are a lot of questions being raised about its operations and has left many to think that who is depositing this huge amount.
Moreover, Bitfinex’s involvement with its sister company Tether has grown to a new level especially its disruption in banking relationships early last year. Many allege that Tether is creating a fictional reserve and issuing more tokens than those being actually backed and further sending them to Bitfinex.
An anonymous report with the name “Quantifying the Effect of Tether” which concludes that it is “highly unlikely that tether is growing through any organic business process, rather that they are printing in response to market conditions. Tether printing moves the market appreciably.”
What is even more concerning in this whole story is that Tether recently dissolved its ties with audit firm Friedman LLP earlier this week. A Tether spokesperson who refused to be identified said in an email statement: “We confirm that the relationship with Friedman is dissolved. Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame.”
Analysts are saying that if Tether fails to build confidence in the crypto community regarding its operations, it could trigger a “bloodbath” in the crypto market.
Bitcoin price has recently slipped by over 10% and below the $10,000 sentimental mark. Currently, at the press time, Bitcoin is trading for $9981.20, according to CoinMarketCap. The recent correction is not limited to Bitcoin but has occurred across the entire market with other altcoins also seen correcting by around 10%. The overall market cap has gone below $500 billion.