In a recent message to its users and investors, South Korean cryptocurrency exchange UpBit revealed it will back its customers’ USDT tokens with dollars, should anything happen. The update should alleviate traders who fear the Tether controversy.
Tether’s USDT tokens are supposedly pegged to the US dollar 1:1. The company has in the past failed to provide proof that all USDT tokens in existence are backed by fiat. Given that there are now over 2 billion USDT in circulation, users are concerned the company is creating money out of thin air.
The Tether token controversy even saw some users abandon any exchange using USDT trading pairs. In response, UpBit has now decided to promise the liquidity of Tethers circulating on its platform.
UpBit is currently the number one cryptocurrency exchange by trading volume, as according to data it boasts a $2.3 billion trading volume in the last 24-hour period. It mostly offers fiat-to-crypto trading pairs. Through a partnership with crypto exchange Bittrex, UpBit also offers USDT trading pairs.
Comforting users who wish to trade using Tether tokens on the exchange, an UpBit official stated:
“We are aware that there are various suspicions related to the recent tether. We will compensate the same amount of money to customers who have a tether in our company even if there is a problem.”
Tether expands to Ethereum
iFinex, the company behind cryptocurrency exchange Bitfinex and Tether, recently launched an Ethereum-based exchange dubbed Ethfinex. The exchange uses Tether tokens printed on top of the Ethereum blockchain (EURT), as opposed to USDT tokens on top of the Bitcoin blockchain.
Blockchain data shows there are over 70 million EURT tokens in circulation. Critics are already closely monitoring these tokens. Their goal is to see if EURT tokens are used to help Ehtereum’s price surge.
By popular demand, now tracking EURT as well. Previous prints will not be posted, but future supply increases and decreases will be.
— Tether Printer (@tetherprinter) February 8, 2018
According to prominent Bitfinex and Tether critics, USDT tokens have been printed to help boost bitcoin’s price and hide insolvency at Bitfinex. Analysis shows that when more USDT tokens are printed, the flagship cryptocurrency’s price rises.
However, as BlockTower Capital’s Ari Paul explains, cryptocurrency exchanges were extremely profitable last year, and Ponzi schemes don’t usually occur in these scenarios. The printing of Tethers could be explained by increasing demand for other cryptocurrencies:
9/ When people wire USD to various exchanges, they are credited with USDT, and they then purchase BTC and other cryptocurrencies. Thus the relationship of USDT printing followed by BTC rallies is not inherently suspicious in my eyes.
— Ari Paul (@AriDavidPaul) February 2, 2018
Notably, Tether has recently been hacked for $31 million worth of USDT tokens. In response, the company upgraded its systems to prevent the hacker from cashing out. The controversy surrounding it led to it being hit with a subpoena from the US Commodity Futures Trading Commission (CFTC)