Tether (USDT), a dollar-pegged, blockchain-based cryptocurrency and crypto platform that claims extreme transparency as one of its benefits, has been grabbing headlines over recent days after it has come to light that Tether's relationship with their auditing firm Friedman LLP has been terminated. The firm had been working on an audit of Tether, which has been positioned by its founders to be more stable than other alt-currencies because each Tether token is supposed to be backed 1:1 by one USD.
According to Tether, which also has close ties to the Bitfinex cryptocurrency exchange, the group has now officially dissolved the Friedman partnership, leaving investors to question the veracity of its current $2.24B market cap. Tether group released the following 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. As Tether is the first company in the space to undergo this process and pursue this level of transparency, there is no precedent set to guide the process nor any benchmark against which to measure its success.”
The Friedman accounting firm was retained in order to monitor and verify Tether's cash reserves and insure that token issuance matched the company's reserves. The full agreement can be seen here.
But recent Tether activity, indicating that the value of their USD volume was higher than the digital currency's market cap, simply and literally didn't add up.
Explaining the Tether Discrepancy
Noam Copel, CEO of DAV, a transportation services platform, voices the concerns of many current and future crypto investors when he questions how transparent the group has actually been:
“Tether needs to clearly explain the recent sharp increase in their market cap, and prove that it was appropriately backed by USD. At the moment there is simply not enough transparency on their part, and that is a warning sign - not only for Tether holders, but for the entire crypto community, because Tether's market cap is high enough to impact the valuation of other tokens, including Bitcoin.”
South-East Asia tech influencer Dejun Qian, founder of the FUSION Foundation says:
“If many off-chain assets in [the] atomic world could be mapped on blockchains’ bit world to realize fast transfer, decentralized transaction and programmability, bounding services, such as custodian, accounting, auditing, legal, physical delivery services will be extremely important.Right now, centralized organizations are very important in creating and managing the real world’s assets. However, if we want those assets to be mapped to blockchains, the mapping process and mapped assets’ off-chain management must be conducted, audited and bookkept by centralized organizations.”
This isn't Tether's first time in the spotlight because of controversy. Last November it was hit by a $31 million hack.
Now, a number of people are suspicious of whether it has the dollar reserves it claims. Tether has hit back at the skepticism, saying the suspicions are ”uninformed and baseless.” As of this writing however, the contretemps regarding fraudulent claims coming out of Tether continues to rage.