Tether – $188B+ unbacked promises

Tether (USDT) is a stablecoin, which is a type of cryptocurrency that actively works to keep its valuation stable through market mechanisms.

Brock Pierce, Reeve Collins and Craig Sellars founded Tether in 2014. The project was originally called Realcoin, but they changed the name to Tether shortly after launch. The company behind Tether, Tether Limited, is responsible for issuing it & managing the reserves.

Bitfinex was the first major crypto exchange to offer Tether trading, which started in January 2015. Although Bitfinex and Tether Limited are separate entities, leaks from the Paradise Papers in 2017 revealed that Bitfinex officials set up Tether Limited.

How does Tether work
When a user tries to deposit fiat money and convert it to Tether coins, Tether Limited generates the corresponding amount of digital money that can consequently be sent, stored, or exchanged. In case when the user redeems the tokens for fiat money, the digital currency is destroyed from circulation, BUT Tether terms of service clearly state that they DO NOT ever have to offer redemptions of USDT for dollars (or even whatever IOUs and bits of string they may or may not have in reserve)!

► Be aware: Tether can withstand a "run" because they do not have to pay you if you ask. In fact if you're a US person, you're not eligible at all. If you're not a US person, it's at their discretion to deem you a "customer." Even if they do that, they can delay your withdrawal arbitrarily. Even if they don't do that, they can pay you out with whatever is actually in their backing!

Let's go deeper
A possible de-peg of USDT could create long-lasting implications on the price of assets like BTC, Ethereum, etc. Somehow exchanges integrated stable coins so much in their systems that a failure of one of them destroys the value of any other cryptocurrency. We watched this happening with the Terra USD (UST) stablecoin as the Terra Luna Ponzi collapsed.

Tether mints new supply and lends to various entities during bullish market conditions that expect to profit from BTC price and pay back the Tether borrowed (with an additional interest). A model that could work as a lending service but lacks long-term viability since it is based on pure speculation instead of growth developments and infrastructure for the sector.

Please note:
• Crafting any sort of Tether short is near impossible because everyone in the game (Tether, the exchanges, etc.) will all be against you if you're winning in the short (there's that scene in "The Big Short" where Mark Baum and crew know the subprime bonds are junk but they visit the ratings agency and they're not downgrading).

• In April 2019, New York Attorney General Letitia James obtained a court order enjoining Tether and BitFinex parent iFinex from further violations of New York law. It had been determined that BitFinex had borrowed at least $700 million from Tether's reserves to offset BitFinex corporate and client funds frozen (and ultimately seized) from its Panamanian banking partner Crypto Capital Corp. in a money-laundering probe.

• In October 2021, the U.S. Commodity Futures Trading Commission (CFTC) announced that Tether agreed to pay a $41 million fine "over claims that Tether stablecoin was fully backed by U.S. dollars." In fact, "Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018," according to CFTC. Bitfinex agreed to pay a $1.5 million fine to settle separate CFTC allegations as part of the settlement.

Fundamentals that Tether lacks
• Tether is not a decentralized blockchain but runs on top of blockchains that some can be considered decentralized.

• Tether is a smart contract containing an option for the developer to freeze any amount of USDT in any wallet, custodial or not.

• Tether is not permissionless or censorship-resistant. Those with access to the smart contract ( Tether devs or execs) can freeze any amount of USDT tokens at any address.

• Holding the keys to an Ethereum or any other wallet and using Tether does not eliminate trust.

The problem
• Tether (USDT) is at the hands of the SEC. As a centralized network operated by a small party, Tether follows the same course as previous (to Bitcoin) private attempts that unsuccessfully operated digital currency networks (e-gold & Liberty Reserve).

• If Tether contained no value for the regulators, the US financial authorities would have already ordered Tether to shut down operations.

Remember
• The SEC can end Tether any time it decides to, and when proper conditions arise, it will do so. As long as it can serve the financial authorities, it will remain relevant.

• Tether is nothing else than an entry point for achieving partial control in the cryptocurrency market. Upon demand of US officials, it will freeze tokens or shut down Tether’s operations.

The main problem
• If Tether ($USDT) depeg from the dollar will lead to catastrophic results in the industry.

• An $188+ billion company that never conducted an audit with an independent accounting firm and never publicly released information concerning its reserves!

If Tether collapses
Immediately halt all trading and restrict deposits/withdrawals.

Force log out of all users and enter a lengthy period of maintenance.

Exchanges, as usual, will try to serve their top customers first but there won’t be room to maneuver with USDT dollar price at 0.

Many exchanges will collapse due to this effect!

The price of most cryptocurrencies will immediately dive and find no bottom before the ground.

Tether MCAP $188+ billion / 13 employees = ~ $14.46 billion per employee.

The Genius act – Tether's Doomsday
On July 19, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act into law, marking the first federal framework for stablecoin regulation in the U.S. This bombshell legislation mandates that all stablecoin issuers maintain 1:1 reserves backed by U.S. dollars, Treasury bills, or other highly liquid assets, with monthly public disclosures and annual independent audits for issuers with over $50 billion in market cap-like Tether.

Tether, with its $188+ billion market cap and a history of zero full audits since its 2014 inception, is in the crosshairs. The company’s quarterly attestations, don’t meet the GENIUS Act’s rigorous standards. Worse, Tether’s reserves include Bitcoin and precious metals, which are explicitly not allowed under the Act’s strict requirements for cash or short-term Treasuries.

The GENIUS Act gives Tether 18–36 months to comply or face a U.S. market ban. A non-compliant Tether will be barred from U.S. exchanges, triggering a potential de-peg and catastrophic crypto market fallout.

It will collapse ?! We don't know but don't say I didn't WARN YOU  !!!