Tether Stablecoin Is Only 74% Backed By Cash: Lawyer’s Claims

Tether stablecoin is only 74 percent backed by cash as it is pointed out in the affidavit filed with the Supreme Court of the New York State. The lawyer, Stuart Hoegner who is also a general counsel to Tether and Bitfinex, revealed the shocking news in the coming altcoin news below.

The affidavit on the tether stablecoin submitted by the lawyer reads:

 “As of the date [April 30] I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.’’

The affidavit immediately sparked debates in the crypto community after some executives from the industry argue that the 74 percent of the tether stablecoin holdings could be considered as a high percentage and that this doesn’t change the concept of fractional banking.

Multiple macro analysts including Alex Kruger who took the Tether stablecoin side in 2018 when it was said that it had cash reserves equal to all of the tokens issued, says it is difficult to argue about this mismatch.  Also, Zoe Phillips, an attorney at Morgan Lewis who also represents the tether stablecoin, says that the altcoin does not have to hold a dollar for each token:

“According to the Attorney General, the line of credit needed to be frozen because it improperly impairs the reserves Tether would use for redemptions. The Attorney General appears to believe that Tether must hold $1 in cash fiat currency for every dollar of tether. These allegations are wrong on multiple levels.’’

Investors usually expect that the Tether stablecoin is fully backed by the US Dollar in a 1:1 ratio because the issuer itself promoted the token as being 100 percent backed. However, as it turns out, the stablecoin’s price had no actions over the past hours when the news was delivered. Some of the traders believe that despite that the tether stablecoin is not seeing some price action; the bitcoin price could react positively.

In the best cryptocurrency news sites headlines, the crypto trader DonAlt said that the FUD around the Tether stablecoin may not bring the price of bitcoin to drop further which may hold the bears in a challenging position.