The genesis of Tether, the central bank of cryptocurrency: how USDT became the leading stablecoin www.deekpay.com

The market capitalisation of USDT, issued by stablecoin leader Tether, officially surpassed $84 billion this month to hit a new all-time high of $84,009,504,538 at the time of writing.

As the Federal Reserve Board began violently raising interest rates last year, it also demonstrated phenomenal profitability by posting two consecutive quarters of net profits of more than $1bn in its two Consolidated Reserve Reports (CRRs) published in the run-up to 2023, and by raising its excess reserves to $3.3bn.

We know that Tether has often been targeted by regulators and FUD news has come out from time to time, but today it is still the leader, and even more than three times that of the second-place USDC. In order to help our readers understand Tether more comprehensively, we will use the following timeline to help you understand the past and present of Tether.

Tether Founded

Tether was founded in July 2014 by Brock Pierce, Reeve Collins and Craig Sellars under the original name of Realcoin. Shortly after, Realcoin officially changed its name to Tether and opened a private beta, setting it on the path to becoming the central bank of the cryptocurrency world.

Pierce is a billionaire entrepreneur and former chairman of the Bitcoin Foundation; Collins is a venture capitalist who has founded several technology companies; and Sellars is a software engineer who worked on Bitcoin and Omni.

What's USDT?

Each USDT is backed by $1 in fiat currency and can be used for cryptocurrency transactions, cross-border remittances, and storage of value. Because its price is less subject to market fluctuations than tokens such as Bitcoin and Ether, many investors hold their assets in USDT to hedge against volatility.

USDT has been the most popular stablecoin option in the cryptocurrency market since its release and is currently the largest stablecoin in the world by market capitalisation.

Second place: USDC / $25.5 billion Third place: DAI / $3.8 billion

Sister Company Bitfinex Profile

In 2012, iFinex was founded in Hong Kong and became the parent company of Tether and Bitfinex.

Bitfinex is a cryptocurrency exchange founded in 2012 that offers a wide range of cryptocurrency trading services, including spot trading, derivatives trading, and collateralised lending, with the most popular currently being the platform's USD lending service.

But the Bitfinex exchange has had its share of difficulties in its development:

Nearly 120,000 bitcoins were stolen.

In August 2016, Bitfinex lost 119,756 BTC, then valued at around $75 million, in a hacking attack that became one of the largest in history.

The US Department of Justice later arrested the American husband and wife team suspected of laundering the Bitfinex hack in February last year - Russian entrepreneur Ilya Lichtenstein and his 33-year-old rapper wife Heather Morgan. When Ilya Lichtenstein appeared for his plea hearing in August 2023, he admitted that he was the man responsible for the 2016 Bitfinex hack, and that he had been involved in the conspiracy to launder the money. When Ilya Lichtenstein appeared at his plea hearing in August 2023, in addition to accepting a money laundering conspiracy charge, he admitted that he was the hacker who committed the 2016 Bitfinex bitcoin theft! The whole hacking story seems to be coming to a head.

Tether and Bitfinex Sued by CFTC, Settle with Sky-High Fines

The U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Tether and Bitfinex exchanges on 14 September 2021, accusing the companies of, among other things, fabricating trading volumes and misappropriating customer funds and allegedly violating anti-money laundering laws.

Causes of action

The CFTC's lawsuit alleges that Tether Inc. and the Bitfinex exchange fabricated trading volumes between 2016 and 2019 by:

Trade with Tether's own funds. Trading with third-party funds. Trading with unauthorised accounts. Settled after paying an exorbitant fine

After more than a year of litigation, Tether and the Bitfinex exchange reached a settlement with the CFTC in October 2022, which included the following:

Tether pays $41 million in fines to the CFTC. Bitfinex was fined $1.5 million for allowing retail trading by U.S. residents. Tether will provide periodic reserve reports to the CFTC for the next three years. Tether will engage an independent auditor to audit its reserves within the next three years.

Early reserves opaque, FUD news constant

Since USDT's popularity with users and its rising market capitalisation, there has been a lot of negative news about the company, most notably about the questionable status of its reserves, which the company did not announce clearly in the early days.

In 2017, Tether began publishing the status of its reserves, though it was questioned by the media and analysts. In 2021, following a settlement with the CFTC, Tether began providing regular reserve reports to the CFTC. According to official documents, Tether's second-quarter reserve report details the assets held by the Tehter Group as of 30 June (the report is audited by BDO, one of the world's top five law firms). Tether's net operating profit exceeded $1 billion again in the second quarter. It also increased its excess reserves by $850 million. At the end of Q2 2023, Tether's excess reserves reached a new high of $3.3 billion.

Changes in the transparency of Tether's reserves also reflect investor demand for Tether's transparency and increased regulatory oversight.

Tether's new CEO: publishes instant reserve data

In an effort to provide clearer, more immediate data, Bloomberg also reported in October that Tether would publish "immediate reserve data" in 2024, citing people familiar with the matter. Paolo Ardoino (former Chief Technology Officer), who will take over as CEO of Tether in December 2023, said: "While other cryptocurrency firms have struggled in the bear market, USDT has grown in circulation over the past year, and now accounts for nearly 70% of the stablecoin market, making it an indispensable part of the way that investors trade and store their digital asset wealth. It has become indispensable for investors to trade and store wealth in digital assets. At the same time, for a company of such systemic importance, little is known about how it works. Tether is committed to addressing the lack of transparency in its proof of reserves in the future.