Bitfinex and Tether: The Good, The Bad, and The Ugly

Bitfinex and Tether (USDT) are back in the news over the past few days after the New York Attorney General (AG) filed a petition in the New York State Supreme Court in Manhattan in regards to dealings between the two companies and Crypto Capital. Below is an analysis of the unfolding situation and a review of what we know so far.

USDT Grew Rapidly, Attracting Naysayers

USDT debuted on the cryptocurrency exchange Bitfinex, in 2015. The asset is a stablecoin that operates on the premise that each USDT is backed by one U.S. Dollar. These reserves were to be frequently audited, and USDT was sold as easily redeemed.

Stablecoins enable frictionless transfers between exchanges, in lieu of the legacy banking system and Fiat currency transfers. Stablecoins also act as an efficient safe haven from market volatility, providing a quick exit or entry for market participants.

Although Bitfinex and Tether have the same CEO, CFO, and General Counsel, each company handles customer deposits and withdrawals slightly differently. For transactions under US$5 million, Bitfinex uses payment processors to handle these transactions…