Tether’s systemic risk an imminent disaster

The Tether collapse theory has been a long-standing stalk of the crypto community. There are currently thousands of articles on Tether-related risks, basically based on real problems such as its lack of transparency and misleading the public.

I hope we have some clear information that if we do not act quickly, Bitcoin may fall below 1,000. It is always very difficult to tell our customers something real, which contributes to the uncertainty of the market.

-Bitfinex & Tether CFO, Giancarlo Devasini, “Merlin” (October 2018)

Just before 2019, Tether had been claiming that every USDT was backed by equal U.S. dollar reserves. But no financial institution can confirm this, and Tether has never publicly conducted an independent audit in a reputable accounting firm.

Tether's systemic risk an imminent disaster

Last week, after Bloomberg reported questioning Tether’s reserve support, Tether CEO Jean-Louis van der Velde’s deleted his Twitter account. So far, Tether has not been able to convince anyone on its reserves. However, it tried to dispel public doubts by releasing some fragmented information, but it only further aroused public dissatisfaction, and at the same time added another sum to Tether’s criminal evidence.

Tether's systemic risk an imminent disaster

This is Tether’s recent announcement of a visual icon of reserve assets. It is said that Tether will provide the transparency that the public has expected for many years in the near future, but it has raised more questions on the issue of “commercial paper”.


Since the establishment of Tether, researchers and skeptics have often launched an offensive against Tether in three areas:

  • Lack of transparency in the so-called reserve assets supporting USDT 1:1
  • Its connection to the unregulated offshore exchange Bitfinex
  • Transactions with shadow banking organizations around the world.

Tether responded to the public’s doubts in a rather perfunctory way. After all, a customized icon can be made in 10 minutes, and this is Tether’s unmatched transparency.

Tether's systemic risk an imminent disaster

Commercial paper

According to this indistinguishable icon, it shows that Tether owns $30 billion in commercial paper. The commercial paper market is actually not as large as imagined, and many evidences show that Tether is not one of them.

Deborah Cunningham, chief investment officer of Federated Hermes, Inc.’s global liquidity market, said in an interview with Bloomberg,

“This is a small market. There are many people who know each other. If a new person comes in, it will usually be very eye-catching .”

The current regulated commercial paper market is actually very small, but there are still a lot of gray or even black areas in the offshore market.

When asked about its commercial paper partners, Tether cited “privacy issues,” which is not a wise answer that the public expected.

black box

Tether’s lack of transparency is mainly due to its dealings with various ash products. Financial Time has disclosed that it lent $1 billion to Celsius Network, and Celsius Network has been scrutinized by the national regulatory agencies for providing some unregulated financial products (mostly high-yield products).

The investigation found that Tether used Bitcoin as collateral to lend billions of dollars to cryptocurrency companies.

—— Financial Time

Since Tether did not disclose the names of its partners and the issuers of short-term debts it calls “commercial papers”, people are increasingly inclined to guess the worst outcome-a large part of USDT loans are lent to Chinese companies Yes, and Evergrande may be one of them. Recently, Tether announced that it does not hold any commercial paper from Evergrande.


These concealed methods make investors more convinced that Tether is hiding some shady facts, and in the end investors can only choose to believe them, and there is no actual data to prove what the Tether executives said.

Tether CEO deleted his Twitter account

According to reports, the Twitter account @urwhatuknow originally belonged to Tether CEO Jan Ludovicus van der Velde, but it has been deleted.

It seems that the CEO of Tether (or someone else who controls the account) deleted this Twitter account, and this happened just after Bloomberg disclosed the risks of Tether, making people want to guess the truth behind the matter.

A similar account (nicknamed urwhatuknow, source) exists on the bitcointalk forum, but it seems that this account has been hacked in 2018.

The only information about him found in Italian newspapers showed that he had been fined for selling pirated Microsoft software.

——Bloomberg News

Perhaps for any average user who feels that social media is becoming a burden, deleting an account is a simple solution. But for the executives of a $70 billion company, this is a matter of principle. In particular, the act of deleting the account occurred after another Tether reserve issue by the public.

Tether executives do not seem to intend to solve the problem. Instead, they completely ignore the public’s problems and provide vague reserve estimates in the form of a pie chart. They even accuse 99% of individuals who question Tether’s practices as “jihadists” (with justice). For reasons, people who use whatever means to achieve their goals).

Tether’s lawyer Stuart Hoegner told me on the phone that Van der Velde and Devasini wanted to avoid the public eye. He called Tether’s critics “jihadists” and they wanted to destroy the company.

—— Bloomberg News

I don’t think anyone wants to destroy Tether. The business management department should be responsible for the survival of a company, rather than shifting this responsibility to investors. As long as the company’s business model is built on a solid foundation, then the company will survive. But if the foundation does not exist, then it is indeed necessary to find an excuse for the impending collapse.

The result of Tether’s public relations is only to make things worse, and these executives are constantly trying to convince the public with unconvincing data. Obviously the public is not a fool, especially when the evidence you present makes the audience have no confidence in it.


Bitfinex is registered in Hong Kong as RenRenbee PTE. Co., Ltd. and has obtained a license to engage in financial business. At a time when MtGox went bankrupt and the cryptocurrency market was facing various difficulties, this license helped Bitfinex build a fairly good market reputation.

Although, Bitfinex eventually suffered a similar fate to MtGox. It announced in August 2016 that it was hacked and lost 120,000 Bitcoins. The hacking attack produced many sequelae. Bitfinex created the “Unus Sed Leo” token to repay the BTC lost by its customers . This hack has caused many problems in the blockchain field, as well as many doubts about Bitfinex’s credibility.

In November 2017, Bitfinex’s Hong Kong license was revoked.

Tether's systemic risk an imminent disaster

After the license was revoked, Bitfinex moved out of Hong Kong. This is the official statement, but it may never have operated in this area. About a year later, Bitfinex said it was registered as a financial entity in the British Virgin Islands.

Which entities support Tether and why?

Tether's systemic risk an imminent disaster

So far, Tether has been good at finding regulatory loopholes around the world. The lobbying strategy created today’s Tether. Tether provided an artificial support line for the BTC price and disrupted the market to a great extent. And now the power from the Bitcoin lobby has doubled 10 times, just like the price of Bitcoin.

It is verifiable who supports and persuades others to support Tether’s obfuscation, and all of this is related to Blockstream, a group that currently controls the development of Bitcoin. Blockstream executives are some of the top supporters of Tether. They promote USDT but have difficulty providing convincing arguments. Therefore, they adopted the same strategy as Tether executives-condemning reporters, and countering those who asked real questions. This is very similar to Tether’s strategy, accusing anyone who asks similar questions is FUD.

Tether's systemic risk an imminent disaster

Samson Mow is the CFO of Blockstream.

Tether's systemic risk an imminent disaster

Adam Back (CEO of Blockstream) also supports Tether overtly and secretly, and also personally attacked Twitter user @bitfinexed (a radical opponent of Tether and Bitfinex) in this tweet. The reason is obvious. Because all financial entities and private companies (including Blockstream) operating on BTC benefit from the operation of Tether.


Tether's systemic risk an imminent disaster

“This article is just an attempt to continue false and old rumors about Tether on the basis of hints and misinformation. This information is disseminated by dissatisfied individuals who have not participated in or directly understood the operation of the company.”

—— Tether’s response to Bloomberg article, Yahoo Finance

Tether once again reacted aggressively to those who questioned its approach. But most importantly, its response is based on the fact that reporters and individuals who wish to get answers and research on this topic have no direct understanding of the operation of the company.

This is true. Tether has been hiding its operations and business practices in various subtle ways. Without a trace of transparency, people naturally assume the worst-case scenario. In this case, these guesses are often true.

The current war on Tether has just begun. And when Tether collapses, Bitcoin will also be destined to have huge volatility, and this is exactly the purpose of the BTC whale lobbying American politicians who are in need of economic support.

A $70 billion company is composed of only 12 people in an extremely opaque manner, which is a strange signal in itself. Due to the existence of Tether, the cryptocurrency industry always has systemic risks, but for those who are truly committed to infrastructure, things will not change much.

Source: Coinmonks    Compiler: Chen Zou

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/tethers-systemic-risk-an-imminent-disaster/
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