As much as Tether might be known for being the digital dollar, discussions in the crypto world about this currency are usually full of doubt as to whether there really is $2.3 billion hidden behind the scences. Many sceptics believe it’s all just hype intended to pump up the cryptocurrency economy last year. This is given more credence when considering the fact that Tether is yet to disclose its US dollar reserves.
Bitfinex and Tether Are Subpoenaed
In fact, early December reportedly saw the United States Commodity Futures Trading Commission (CFTC), issue a Subpoena to Tether and Bitfinex (a trading and crypto exchange platform). This round of controversy was not new to both companies as they had earlier lost some of their banking partners, further raising eyebrows over the lack of transparency of both companies.
However, what stands out the most is the fact that just after the CFTC issued the Subpoena to both entities, on 6th December 2017, the number of USDT tokens in circulation increased by about 52.5 percent. Granted, since February 2017, the number of USDTs in circulation has rised from about 25 million USDT to over 2 billion in January 2018 – a 9000 percent growth. But with the increase since December 2017 making up about 34.5 percent of the total supply of USDT, most crypto enthusiasts have grown suspicious.
It is still unclear what the subpoena by the CFTC had to do with either Tether or Bitfinex as the details are not yet out, but it is hard to explain the rise in the number of USDT in circulation considering that both firms lost a significant number of their banking partners in early 2017. Furthermore, Bitfinex has been plagued by controversial issues to do with insider trading. This clearly hasn’t helped tone down speculation about the two companies being involved in market manipulation attempts.
Bitfinex and Tether Response
Responding to the subpoena, both companies issued a statement saying that they “routinely receive legal process from law enforcement agents and regulators conducting investigations”. According to the policy of both companies, no further comment on the matter could be issued.
On the other hand, a published open letter co-authored by Jay Clayton (the Chairman of the US SEC) and J Christopher (the Chairman of CFTC) indicated that the opening of CBOE and CME Bitcoin futures trading has enabled “oversight of the US Bitcoin Futures market and access to data that can facilitate the detection and pursuit of bad actors in underlying spot markets”. The open letter came just a few days before the two entities were subpoenaed.
Even though there has been no official statement from CFTC or from Tether and Bitfinex, most cryptocurrency enthusiasts will tell you that they have collaborated to increase USDT in circulation so as to manipulate market prices on exchanges in a last-ditch attempt by both companies to stabilize themselves.
Let us know what you think. Is the increase of USDT in supply a malicious attempt to manipulate the market?