Cryptocurrency - Investing
The WHOLE TRUTH About TETHER ($USDT)
Top Facts That Critics And The Media Hide
In a previous story published a year ago, wearrived at the conclusion that Tether hasn’t collapsed because it is currently used by certain agencies for specific reasons.
The accuracy of this hypothesis was recently confirmed by Tether’s own announcements, which aligned precisely with what we had described.
My assumption was proven to be correct, although some details are still out of context and may lead us to an even more disturbing conclusion.
Therefore, we still need to unravel the enigma that is Tether ($USDT) in its entirety and shed light on this complex and significant for the entire cryptocurrency market matter, aiming to provide a comprehensive understanding of the situation.
Yet, first, we have to begin with the “truthers”, the front where Tether meets most of the criticism and their fallacies.
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The Critics (“Tether Truthers”)
Since 2017, I’ve been critical of Tether and have been keeping up with other Tether critics and their perspectives, so allow me to elaborate on my conclusions.
Those seeking to understand the truth behind Tether are bamboozled by one-sided information from both sides (Tether and critics), therefore, failing to reach the core of the situation.
While Tether critics point out valid concerns about the stablecoin (USDT), they selectively neglect to mention a deal between Tether, financial authorities, and agencies.
Tether was not just allowed to survive, but the stablecoin also became an instrument at the hands of these organizations.
I doubt any Tether critic ever posted anything like that, yet I have thoroughly examined this hypothesis and reached this conclusion since mid-2022. Nobody from the truthers camp ever mentioned this deal.
Furthermore, I have also concluded that most of the top influencers in this anti-Tether campaign oppose financial freedom and self-sovereignty.
They denounce the entire cryptocurrency spectrum, a trillion-dollar industry, and condemn anyone participating or promoting what we consider to be the future of money.
While advocating for regulations, the critics tend to undermine the potential of any disruptive innovation emerging from the cryptocurrency field.
It also appears that while most of these individuals have honest intentions, several more are just traders looking for the right opportunity to long or short the market.
Tether’s claim about FUD emerging from these cycles is not entirely false, as some online publications and individuals on social media are indeed just spreading fear, uncertainty, and doubt and profiting from it.
Regardless, most of the Tether truthers are either intentionally or naively leaving out vital details of the case.
Therefore, they are as much a poor source of valid information on Tether as Tether itself.
Here’s what actually happens with Tether ($USDT) and the Tether “Truthers” have not told you so far.
Tether is Fully Controlled By Law Enforcement And Secret Agencies
I had already reached this conclusion about a year ago, and now Tether vindicated my position:
Why Tether ($USDT) Hasn’t Collapsed (Yet) And When It Will
Quote from my story “Why Tether Hasn’t Collapsed Yet and When It Will” (June 2022):
Tether’s future lies in the hands of the US government…
The SEC can end Tether any time it decides to, and when proper conditions arise, it will do so. As long as it can serve the financial authorities, it will remain relevant.”
Tether has recently proved my hypothesis correct, as the small team in control of the stablecoin (also running the Bitfinex exchange) has recently announced that various agencies have full access to their databases and collaborate fully.
The trade-off was this:
Tether complied fully with requests by authorities and kept all of the scandalous activities active with fractionalization of reserves and purchases of Bitcoin BTC, which remarkably now announces publicly for the first time.
All this time since 2017, Tether has categorically denied accusations of purchasing Bitcoin with USDT and manipulating the price.
Yet, today, Tether is publicly announcing purchases of Bitcoin, which it also uses to cover USDT reserves.
$800+ million Frozen USDT
Tether (USDT) is at the hands of the SEC, and with the pretext of the Terra USD stablecoin de-peg and collapse, new regulations will soon apply.
As a centralized network operated by a small party, Tether follows the same course as previous (to Bitcoin) private attempts that unsuccessfully operated digital currency networks (examples: e-gold, Liberty Reserve).
From my story: “Why Tether ($USDT) Hasn’t Collapsed (Yet) And When It Will” — 2022
My story shed light on a situation largely overlooked, when critics and supporters of Tether, or nobody else, was entering such lengths.
Yet, despite this recent vindication, more questions emerge.
Cointelegraph reported in 2022 that Tether uses funds backing frozen USDT to reissue more stablecoins:
“Tether works closely with law enforcement worldwide to assist in investigations, and has to date assisted in freezing over 360 million in assets, 101 million of which have either been reissued or are scheduled to be reissued.”
(Cointelegraph, Oct. 11th, 2022)
How exactly are agencies gaining leverage from this partnership?
Freezing Tether in addresses is not the same as seizing funds.
So far, more than $865 million in USDT stable tokens have been frozen.
$865 million!
And here is what nobody told you yet.
Tether is using any funds allocated to back the frozen USDT.
The funds that back the USDT reserves are not seized, therefore Tether uses these funds:
- a) to cover the extensive gaps in USDT reserves, and
- b) to mint and release new USDT.
Tether appropriates the funds used to cover the value of these USDT tokens, and the agencies that order the freezings of USDT allow this!
This unprecedented procedure appears designed to provide Tether with a lifeline to cover gaps in their reserves and avoid collapse.
Therefore, it is the same system accusing Tether of running an elaborate grand scheme (worth more than $85 Billion), that enables it to stay afloat.
Frozen USDT (approximately $865 million at the time of writing) becomes unbacked and at Tether’s possession to utilize in any way Tether desires.
They are not removed from circulation and are not redeemable either.
Tether uses the frozen USDT reserves to issue even more USDT since agencies haven’t seized the funds, which is unprecedented as an enforcement tactic to gift the funds to Tether.
On every other occasion, funds are seized one way or another.
Certainly, Tether (centralized, censorable stablecoin), can freeze tokens in addresses.
It would have been preferable for the authorities to require the redemption of USDT by Tether, and to confiscate the USD as a standard protocol.
Additionally, it is worth considering what will happen with the remaining 2/3rds of the reserves from frozen USDT, given that Tether has acknowledged using 1/3rd to cover new USDT.
Why does Tether get to keep the “loot”?
If this statement stands correct, this is actually a gift to Tether, sustaining growth and enriching its operatives. With fake USDT using the same reserves as the frozen tokens.
In case authorities request Tether to freeze addresses, it should also:
Either confiscate the funds and sell the USDT for USD, or
Ask Tether not to use the reserves backing the frozen USDT.
Why do authorities allow Tether to use these reserves again?
Obviously they control Tether USDT and want it sustained for the time being.
Remember the secret sauce Paolo Ardoino mentioned before?
The secret sauce was secret services.
Conclusion
Tether is allowed to exist by the US government.
We’ve previously discussed how finance and politics now understand there is a role for crypto and how it would be profitable for them to attempt to utilize cryptocurrency to their advantage with the upcoming 2024 elections (read: Crypto Will Be Political In 2024).
The Tether/Bitfinex team is working side by side with agencies that allow the scheme to persist. Yet, when Tether is no longer needed it will be forced to shut down.
Whether backed by reserves or not, Tether, as a centralized stablecoin is vulnerable to external pressure. A single cease and desist letter could be enough to cause its downfall. We could study the case of Liberty Reserves from two decades ago to understand the risks involved.
Therefore, within the current conditions as described here, Tether will be relevant and will keep growing for as long as the agencies allow its presence.
Once the government no longer needs it, Tether will be tossed away and hunted down by the same agencies it serves today.
