In what could spark yet another round of controversy, the co-founder of the most popular stablecoin, Tether (USDT), William Quigley, said that it wouldn’t matter if the cryptocurrency weren’t actually backed by US dollars as long as everyone agreed to value USDT at one dollar. This line of reasoning, however, puts Tether in the same basket as most fiat currencies that are not backed by anything.
Controversy at its Best
USDT is the most popular and widely-used stablecoin on the cryptocurrency market. According to its website, every token is 100% backed by the company’s reserves, including “traditional currency and cash equivalents and, from time to time, …other assets and receivables from loans made by Tether to third parties.”
As CryptoPotato reported, this information came via a silent update to the company’s website, which raised serious doubts about the stablecoin’s dollar peg. The site previously read, “Every tether is always backed 1-to-1 by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD.”
If this wasn’t enough to fuel the flames of doubt and uncertainty surrounding the already popular stablecoin, co-founder William Quigley did so in a recent interview with Bloomberg:
Whether or not Tether was backed by the dollar actually wouldn’t matter if everybody agreed to take Tether and to value them at a dollar themselves.
He also alluded to the controversy surrounding the company when the NYAG started its investigation, alleging that Bitfinex (Tether’s sister company), had covered up an $850 million loss by accessing at least $700 million worth of the $900 million in USDT tokens from Tether’s reserves. Quigley said that despite Tether’s inability to access that $850 million, the price of USDT remained stable at $1, suggesting that this was what people valued it at.
But that’s an issue because Tether’s dollar peg is what gave it the moniker “stablecoin” in the first place. It’s supposed to be backed by the dollar because that’s where its “stable” value comes from.
Tether Goes Another Round
The fact that one of Tether’s co-founders has openly said that it doesn’t matter whether or not USDT is backed by the US dollar is alarming, to say the least.
Removing Tether’s dollar peg would make the cryptocurrency nothing but a speculative digital asset with absolutely no actual value and use case. It would turn it into mere speculation and, as we know, the cryptocurrency market itself is highly speculative and incredibly volatile. Stablecoins are what people turn to in order to hedge their investments in times of violent price swings, and if the dollar peg were removed, they’d be practically useless.
This is reminiscent of traditional fiat currencies which the crypto community traditionally opposes. Most of those are backed by nothing, and we’ve already seen the consequences of that. Countries such as Venezuela have seen their national currencies be severely devalued.
This April, for example, the Central Bank of Venezuela calculated that the annualized inflation rate was 282,973%.