Tether (USDT), the biggest source of liquidity on the cryptocurrency markets, is resembling a fractional reserve operation, as each coin is not backed one-on-one by dollars. By the latest admission of Tether Inc., the ratio of backing by fiat in a bank is 74%.
“As of the date 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,” wrote Stuart Hoegner, a lawyer for Tether, in a recent affidavit.
Based on those reserves, Hoegner claims that user funds are not at risk. However, in the past, doubts that Tether was holding dollar backing for each USDT in circulation have caused a run of selling USDT, and a crash of the dollar peg. USDT went as low as $0.85 in October 2018, when doubts about Tether’s solvency made traders atte...