USDT Tether 74 percent backed – how will Bitcoin and cryptocurrency react? The issuer’s General Counsel, Stuart Hoegner, in an affidavit, admitted that USDT holds about $2.1 billion in cash and short-term securities. Hoegner is also general counsel to Bitfinex, who shares ownership with Tether.
The two companies, Bitfinex and Tether, is at the heart of allegations by the New York Attorney General, who says that Bitfinex borrowed more than $600 million from Tether after losing up to $850 million to a currency converter.
Hoegner filed the affidavit to support an Order to Show Cause to vacate or modify the NYAG’s ex parte order and to stay the order. This would have compelled Bitfinex and Tether to produce certain documents by May 3rd.
Under the subheading of “Tether Holders Are Not At Risk”, Hoegner confirmed that USDT is no longer backed 100% by cash or liquid assets. Verbatim, it reads:
“As of the date [April 30] I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.”
There are roughly 2.8 billion USDT tokens in issuance at the time of writing.
Zoe Phillips, of Morgan Lewis, another attorney representing Tether, wrote a memorandum of law in support of the defendants to show cause that Tether does not need to hold $1 for every USDT issued.
The terms of Tether and Bitfinex’s credit agreement was “negotiated on an arm’s length basis on commercially reasonable terms,” she said. She also noted that independent counsel represented each of the companies. That seems to differ from the fact that Giancarlo Devasini signed both Tether and Bitfinex’s agreements.
Hoegner reiterated in his affidavit that the agreement between Bitfinex and Tether was made “for the protection of the virtual currency market”, underscoring concerns that the two companies are a significant part of the crypto market infrastructure.
What do you think? Do you think that USDT is stable enough to only have 74% of its holdings in cash? What do you think this means for the rest of the cryptocurrency market? Let us know what you think on our Facebook page!
