The crypto-friendly country has launched its state-backed cryptocurrency project to create further financial inclusion for citizens.
It has been confirmed that Tether is not fully backed by the US dollar, as it claims to be. In fact, the stablecoin only has 74% of its reserves backed by the US dollar.
Reported by lawyers from Morgan Chase in the Supreme Court of New York documents, it is stated that less than three-quarters of the stablecoin is backed:
“ In fact, Tether’s reserves of cash and cash equivalents alone (without the line of credit) would cover approximately 74 percent of the outstanding amount of tether. This sort of “fractional” reserving arrangement is similar to how commercial banks work. No bank holds in liquid cash more than a small percentage of depositors’ money.”
The documents, as part of the legal process including the New York Attorney General, follow claims against cryptocurrency exchange Bitfinex, which is headed up by Tether’s CEO, stating that the exchange covered $850 million USD in losses. In an email to its customers, Bitfinex responded to the claims, saying that the allegation is “categorically false.”
Headed by the subtitle, “Tether Holders Are Not At Risk” Zoe Phillips of Morgan Chase stated:
” At present, Tether has cash and cash equivalents (i.e., short-term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers. Between December 2018 and April 29, 2019, the average daily fiat redemption has been $566,066.00, with the largest being $24.2 million. The vast majority of redemption requests of Tether are for less than $1 million. Even if Bitfinex fully draws on the remaining amount of the line of credit, the reserves will still be just below $2 billion, representing approximately 68% percent of the current outstanding tethers.”