A Bloomberg investigation into the inner workings of Tether, the leading cryptocurrency token tied to the value of the United States dollar, suggests that the company responsible for keeping USDT afloat has engaged into considerable risk in order to do so. The bombshell report was prepared by Zeke Faux, a respected financial journalist who has previously worked on investigations related to the shadowy world of offshore financial havens.
In his report, Faux explains that the monetary reserves Tether holds in order to manage the stablecoin are not as solid as the company claims. The Bloomberg article explains that Tether is being held together by means of interest payments on massive cryptocurrency loans as well as investments made in the burgeoning sector of blockchain development in China. Faux believes that it would only take a few of these loans to default in order to drive Tether's value well below $1; such as situation would scare investors and undermine the purpose of USDT as a stablecoin.
The chief financial officer representing Tether has strongly refuted the allegations; however, it should be noted that this is not the first time such a report questions the financial strategies of the company with regard to providing sufficient reserves. In fact, the company has already completed a financial settlement based on a complaint issued by the New York Attorney General in this regard.
The allegations in Faux's article may not be fully unfounded; the company has done quite a lot to promote its stablecoin in order to appeal to the masses of people seeking a secure form of currency in the wake of recent market turbulence. In order to encourage new investors, the company was recently sold a $35 million investment option, a move that was also viewed as a way of protecting the company from the legal threats it is facing. However, some experts have already voiced their skepticism at this strategy of defending Tether by buying itself a large sum of its own money. In order to do this, Tether was forced to borrow $35 million in Bitcoin from a private entity, and this did not sit well with some major investors.