According to the latest announcement, Tether, the firm behind the issues of controversial stablecoin USDT, certified that it has redeemed a huge amount of USDT from the circulating supply of tokens. In the past weeks, Bitfinex has been transferring millions of dollars worth USDT tokens back to the Tether treasury.
In September 2018, the market cap of Tether has been decreasing continuously, with currently just above $2 billion. As per the recent official announcement, Tether is going to destroy 500 million USDT tokens from its own treasury wallet.
The whole statement said by the company is as follows:
“Over the course of the past week, Tether has redeemed a significant amount of USDT from the circulating supply of tokens. In line with this, Tether will destroy 500m USDT from the Tether treasury wallet and will leave the remaining USDT (approx. 466m) in the wallet as a preparatory measure for future USDT issuances.”
There is nothing doubtful about the current process as Tether insurance and redemption process is mentioned in the Tether Whitepaper. The company says, “every tether issued or redeemed, as publicly recorded by the Bitcoin blockchain will correspond to a deposit or withdrawal of funds from the [company’s] bank account.” If you want to check, you can check issuances and redemptions by checking the balance in the Tether Treasury wallet on the OMNI blockchain.
Previously too, the tokens were stored in the account as “Tether treasury.” In the last few weeks, there has been an immense flow of USDT to the Treasury, especially after the cryptocurrency lost equality with the US dollar last week which has raised a lot of questions about Tether's access to banking services.
Starting from Oct 14, the price of USDT started to fall below $1.00, to Oct 23, around 680 million USDT were been transferred to the firm's controlled treasury wallet. All the transfers were being done from an address managed by Bitfinex, a crypto exchange which works similarly in terms of ownership and management.
Bitfinex's cold wallet business has been decreasing to about 100,000 bitcoin from last September, due to which a lot of users speculating that it has been spending bitcoin in order to take off tether off the market in order to bring back the exchange rate to $1.00 mark or just to exit the stablecoin business completely.
According to the official announcement, it is absolutely clear that 500 million worth USDT tokens that were redeemed and destroyed contributed 52% of the overall supply. However, considering fiat accounting, the Tether whitepaper notes that some fraction of the ‘Solvency Equation' for the Tether System the provability of the U.S dollar reserves will depend on some processes. This consists of differential professional audits and Tether's publication of bank account balances on the Transparency page.
Since last few weeks, there have been questions raised about Tether's transparency conduct in the crypto industry. Various experts believe that Tether has a skeptical relationship with the Bitfinex exchange. Some charges say that Tether used to source extra USDT tokens to Bitfinex without truly helping them with the physical USD. On the other hand, some allegations indicate that Bitfinex has been artificially inflating Bitcoin price using USDT tokens.
Question regarding the Tether's suspicious behavior started increasing after Tether mentioned that it has a relationship with third party auditor Friedman LLP, in January 2018. Then later in June, Tether caught its reserves audited from Freeh Sporkin & Sullivan who mentioned that the firm consists of enough reserves for its circulating tokens stored in an unknown bank.