Tether (USDT) Not Backed by 100% Cash; New Terms of Service Include Loans & Assets

A shift in wording suggests that the Tether company is backing some USDT with loans, in effect inflating the money supply without direct dollar inflows.

Tether (USDT) caused another round of disturbances in the cryptocurrency space, by altering the wording on its terms of service. While previous formulations held that all USDT were backed by fiat reserves, this time, the nature of the “backing” is extended to include forms of debt and cash-like assets.

The site states that “All tethers are 100% backed by Tether’s reserves”. The company has extended the meaning of “reserves”, however, to include additional financial instruments. Per the renewed website:

“Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”).”

In the past, the Tether treasury has been accused of minting USDT out of thin air. Despite the circumstantial evidence of bank reserves, so far no audit has been completed for the USDT stablecoin. This time, the cryptocurrency community sees the behavior of Tether as an attempt to perform a form of homegrown fractional security banking:

https://twitter.com/iamjosephyoung/status/1106126026122264576

The stablecoin remains one of the most active digital assets, and Binance trading boosts its influence, as the exchange holds nearly 700 million USDT in various wallets. At the same time, the Tether treasury has acted rather conservatively, mopping up about 60 million USDT in the past couple of months.

However, USDT-based liquidity has never been higher for both Bitcoin (BTC) and altcoins. The share of the USDT/BTC pair covers nearly 80% of the leading coin’s trading activity, meaning without USDT, the prices would not remain near their current levels. Fiat inflows into BTC remain slim.

For altcoins, USDT also has a direct or indirect influence, with the leading assets receiving direct inflows and having their own USDT markets. The latest asset to get a USDT pairing on Binance was Monero (XMR).

The dominance of USDT has preserved BTC prices with relative stability. As of 6:30 UTC on Thursday, BTC traded around $3,931.99, with a $91.66 premium on the US markets.

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