The controversy surrounding the backing of Tether’s USDT tokens has resurfaced following a recent alteration to the company’s terms of service that now state the reserves backing USDT comprise “traditional currency and cash equivalents and … other assets and receivables from loans made by Tether to third parties.” Despite tether’s dominance among stablecoins by market share and capitalization, Tether is facing increasing competition from newer stablecoin projects that have been able to provide regular attestations evidencing U.S. dollar backing since launch.
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New Tether Terms of Service State Stablecoins are not Exclusively Backed by USD
Tether has updated its terms of service regarding the backing of its USDT token, apparently reversing previous assertions that all USDT tokens are backed one-to-one with USD reserves.
Tether’s homepage now states that “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.”
The company’s legal page also states that “the composition of the Reserves to back Tether Tokens is within the sole control and at the sole … discretion of Tether,” adding that “Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves.”
Rival Stablecoins Evidence USD Backing Through Monthly Attestation Reports
While Tether appears to have backed down on its previous claim that all outstanding USDT are tokens are backed by USD, many of its rivals have provided regular attestation reports demonstrating fiat backing.
Trueusd has provided between one and three attestation reports per month since launching during March 2018, with top 40 accounting firm Cohen & Company producing the reports. As of Trueusd’s most recent report, which refers to accounts examined as of Feb. 28, 2019, the company’s 201,727,658 outstanding TUSD tokens were then backed by $202,621,765 dollars that were held in Trueusd’s bank accounts.
On Feb. 15, 2019, Circle published its fourth monthly attestation report pertaining to the USD reserve for its USDC token. The report states that as of January 31, 2019, the outstanding 307,7903,924 USDC tokens were backed by $307,848,312 held in custody accounts.
Since launching in Sep. 2018, Paxos has provided monthly attestation reports provided by Withum for its Paxos Standard Token Stablecoin. Paxos’ most recent report asserts that as of Feb. 28, 2019, the 109,543,189.7 PAX tokens were backed by USD reserve “at least equal to or greater than “$109,543,189.70.”
What is your response to the changes recently made to USDT’s terms of service? Share your thoughts in the comments section below!
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