The Bitcoin-based lending of Tether collides with the dollar promise

A great customer of Tether said that in return for cryptocurrencies, the company was lending new stable coins - an assertion that uses the founding of Tether that only uses real dollars for the output of his tokens.

Alex Mashinsky, whose crypto credit platform Celsius Network lent himself and it counts as an equity investor, the Financial Times said that Tether issued his so-called USDT units in return for well-known cryptocurrencies.

"If you give you enough security, liquid collateral, Bitcoin, Ethereum and so on.. You will keep against it," he said.

"A new USDT is issued for such loans," he added, and later destroyed when the loan is closed, "so that the USDT round is not permanently increased".

In contrast to Tether's commitments, the comments are to spend units of the world's largest stable coin only against hard currency.

The long-term one-to-one connection of Tether with a dollar was the basis for a 70 billion dollar stall, which lubricates global crypto transactions and offers a smooth possibility of getting in and out in crypto-assets such as Bitcoin and Ethereum.

The StableCoin operator, which was founded in 2014 and has been subjected to an intensive regulatory and media examination in recent years, says in his current terms of use that "only money is accepted in the issue". The conditions, last updated in May 2020, expressly exclude the acceptance of digital currencies such as Bitcoin for payments.

This year, Tether imposed a fine of several $ 10 million after they found that they had previously portrayed their reserves incorrectly. The company has neither admitted nor denied the findings of the Commodity Futures Trading Commission and the New York General Prosecutor. Both cases focused more on what Tether did with the received dollars than on the output process.

The one-to-one emissions against dollars are generally regarded as a key feature of the stablecoin industry and was a central point in Tethers WhitePaper during its introduction seven years ago. A senior employee of a US cryptoplattform said that his understanding was that "the only thing you can use to create and redeem" is a US dollar ".

Regardless of his terms of use, Tether used a broader language in a “Primer” published in May this year to describe how Usdt is brought into circulation.

In the primer it says that "newly exhibited" [USDT] must be secured by collateral "and this" redeemed "[USDT] TOKEN will not be brought back to circulation, unless new collateral has been set.

from the FT for a comment asked, Tether repeatedly refused to provide details about how to function his USDT credit allocation or to clarify whether it spends new tokens through the program.

"We have a selected, small group of customers who borrow USDTs in exchanging collateral. These loans are secured by collateral that Tether owns of well over 100 percent of the loan revenues," said Tether and added that no loans were assigned to connected companies.

"Our loan program was disclosed for the first time in our breakdown of the reserves and is no secret. The scope of the program is currently being disclosed in our quarterly confirmation notes.. This practice is common for other stable topics. This lending is closely, efficient, safe and profitable," added the company.

The disclosure of Tether's reserves shows that in June this year around 4 percent of its total assets or 2.5 billion. In the information, it is not distinguished in the information whether the loans by awarding USt against collateral or by awarding dollars that have paid other customers when purchasing USt.

Mashinsky said that the loans from USDT are usually at least 30 percent overlooked, with the amount varied depending on the market volatility. "When Bitcoin sinks, give us a Margin Call [and then] we have to give you more Bitcoin," he added. At the beginning of this month, Bloomberg reported that Celsius had lent himself worth $ 1 billion from Tether.

Tether fights for a US collection lawsuit in which it is claimed to have spent Usdt without any support to buy Bitcoin as part of a market manipulation program. The company rejected the claims and referred to the case as a "mess" and "awkward attempt to procure money". In the past month, the federal judge, who supervised the case, dismissed half of the lawsuits, but continued the others.