Tether, the largest stablecoin by market cap, has revealed new details regarding its collateral model. Until recently, Tether has claimed that its $2 billion token supply is backed by a reserve of real US Dollars. Now, it seems that other assets are also being used to back the coin. Tether’s website now states:

“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”).”

Tether has two duties as a stablecoin: to maintain price parity with the US Dollar, and to prove that it is backed by an actual reserve of US Dollars. But for the past few years, Tether’s ability to accomplish those things has been called into question due to the company’s unsatisfactory audit practices.

As such, the revelation that loans partially account for Tether’s value is worrying. Many already believe that Tether has insufficient reserves due to the company’s poor attempts at transparency. This has not been proven, but Tether’s admission that it bases its value on anything but real currency is sure to reignite controversy.

Incidentally, this update has been published just months after Bloomberg declared that Tether does indeed have adequate reserves. Another independent investigation reported the same results earlier. However, these were not proper audits, and furthermore, there may be no way to win over Tether’s countless critics after several cycles of doubt and reassurance.

Despite widespread outcry, it is unlikely that this controversy will be the incident that kills Tether. An eventual collapse isn’t inconceivable, but there is much debate about how that would actually play out. Any controversy could trigger selloffs and result in minor price fluctuations, but Tether has recovered from all of the price drops that it has experienced so far.

This means that Tether will probably remain a major force for the foreseeable future. Regardless of its true market cap, Tether is the most influential stablecoin in existence. TRON, for example, has recently announced its intent to integrate the coin with its platform, and Tether indicates that it will push for integration on many other blockchains as well.

But even though Tether dominates the stablecoin market, that has not stopped others from challenging it. Competing stablecoins like TrueUSD and USDCoin have respectively built themselves on the promise of better transparency and reduced centralization. If Tether eventually loses its prominence, there will be plenty of contenders ready to take its place.

The post Tether Reveals That Its Reserves Aren’t What They Seem appeared first on UNHASHED.

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