Changpeng Zhao, the maverick leader and founder of the world’s largest cryptocurrency exchange by adjusted volumes, has announced that the on-ramp will be moving USDT funds to a new cold wallet address adding that “one large transaction coming” while assuring clients that their funds are safe. In recent days, the company behind Tether and affiliated cryptocurrency exchange, BitFinex, has been entangled in controversy that threatened to irreparably damage their reputation after the New York Office of Attorney General said it would be suing the parent company for alleged fraud.
The office said they had evidence revealing that indeed the exchange used Tether reserves to plug a $850 million hole after lending out funds to a Panama company. Even so, in effort to diffuse FUD and calm down the market—already the premiums are soaring, BitFinex responded saying “the New York Attorney General’s office should focus its efforts on trying to aid and support our recovery efforts.”
Tether: Peg and Transparency
From their text book description, Tether is a stable coin that is on theory backed 1:1 against fiat in the USD. However, the failure of the Tether Limited, the face company issuing USDT, to allow a third-party audit firm to—on behalf of the community—assure the peg holds by going through their books has been futile. Instead, the Tether allowed an uncredited law firm to audit their books on their behalf further infuriating the community who are adamant that Tether Limited are manipulating the markets via the stable coin.
Tether Limited says their stable coin “converts cash into digital currency, to anchor or tether the value to the price of national currencies like the US dollar, the Euro, and the Yen.” At the same time, the coin is “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 (collectively, “reserves”). Every tether is also 1-to-1 pegged to the dollar, so 1 USD₮ is always valued by Tether at 1 USD.”
Response to Binance Decision
When a curious Twitter user asked why Binance was moving USDT to a new address, CZ replied saying the “rotate/expire addresses as a SOP (standard operating procedure).” Even so, others were doubtful of Binance move with another skeptic Twitterati asking “Again, if this is SOP then when was the last time this standard procedure was executed? wouldn’t we have seen a rotation in the past?” However, another joined in saying the exchange was doing this for “fun” and yet another user lauded CZ’s Binance move saying “Imagine if our banks were as transparent. Thanks for sharing this with us CZ.”
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