Back At It Again: Tether Reopens Fiat Redemption


November 27, 2018 11:09 PM

Tether updates its offerings, but questions about its battles with transparency and ties to Bitfinex are likely to persist.

In April 2017, Tether Limited, issuers of the tether stablecoin (USDT), announced that Wells Fargo had stopped providing banking services to Tether’s Taiwanese banking partners, causing restrictions on deposit and withdrawal functions for the stablecoin’s users. Later, in November 2017, 30,950,010 USDT was taken from the Tether treasury wallet, bringing an end to the 1-to-1 redemption promised in the white paper. Now, according to a November 27, 2018, announcement on its website, Tether has reopened account verification and the redemption of fiat currency to USDT.

The announcement clarifies that as a result of their new relationship with Deltec, a Bahamas-based bank, Tether can once again “[allow] the immediate withdrawal of Tether to fiat (1:1), with the ability to acquire coming soon.”

It also details the minimum requirements for withdrawals and deposits set at $100,000 and 100,000 USDT, with fees ranging from 0.4 percent to 3 percent depending on the size of the deposit or withdrawal. It is stipulated that customers are limited to one USD fiat redemption per week.

A Not-So-Great First Impression

The Tether announcement comes after a difficult October for the currency, which saw confidence in the stablecoin drop with its trading value as the company’s lack of transparency came into question. ETHNews covered the decline in trading value when it reached 92 cents.

Part of the reason for the declining value may have been tied to Tether Limited’s efforts at reassuring investors. A January 2018 audit by Friedman LLP was meant to “provide an interim analysis of [Tether’s] cash position and our issued and outstanding tokens, as part of the ongoing efforts to further professionalize the transparency mechanisms of Tether Limited.”

By January 27, however, the audit was canceled, leaving behind continued skepticism surrounding the company’s transparency. A transparency report published by Freeh Sporkin & Sullivan LLP (FFS) claimed to have confirmed “the U.S. Dollar (‘USD’) balances in accounts owned or controlled by Tether at its banks.” This did little to squelch doubt in the stablecoin as FFS isn’t an accounting firm and FFS co-founder Eugene R. Sullivan was an advisory board member on one of Tether’s banks.

A Better Second First Impression?

Whether or not Tether’s update will bring back some of the faith its users lost is still up for debate. Its transparency page reports the amount of fully backed USDT to be $1,911,322,412.12 at time of press, though even that has come into question in the past.

Tether’s announcement was coupled with Bitfinex posting on Medium that users of the crypto exchange would be able to “trade Tether-fiat directly on our platform through the addition of USDT/UST and EURT/EUR Tether trading pairs. This replaces the previous 1:1 conversion on deposits and withdrawals provided by Bitfinex, and reflects the increasing range of choice in the stablecoin market and demands from our customers.”

The exchange’s “Tether neutrality” allows the rate at which USDT can be redeemed through Bitfinex to be tied to market conditions rather than having it locked to the 1-to-1 exchange rate.

The continued relationship with Bitfinex may irk some users. Both companies share a CEO, Jean-Louis van der Velde, and scholars at the University of Texas at Austin suggested earlier this year that Tether was being used to increase the prices of digital currency on the Bitfinex exchange. The authors of the paper wrote, “By mapping the blockchains of Bitcoin and Tether, we are able to establish that entities associated with the Bitfinex exchange use Tether to purchase Bitcoin when prices are falling. Such price supporting activities are successful, as Bitcoin prices rise following the periods of intervention.”

It’s worth noting, however, that the publication of the paper in June 2018 did not correlate to a drop in Tether’s trading value at that point.

Nicholas Ruggieri studied English with an emphasis in creative writing at the University of Nevada, Reno. When he’s not quoting Vines at anyone who’s willing to listen, you’ll find him listening to too many podcasts, reading too many books, and crocheting too many sweaters for his dogs, RT and Peterman.

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