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Some time ago I expressed my concerns about <strong>Tether</strong> and their stable coin <strong>USDT</strong>. They’ve always promised that every single USDT issued will be backed by one USD. As long as that’s the case, there is nothing to worry about. They promised regular audits by a reliable third party, but never delivered. Tether’s website was changes multiple times throughout 2018, but a recent change now says that Tether no longer backs their issued USDT by USD. Instead it gets 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’)”.

The part: “loans made by Tether to third parties” worries me. This is essentially what a bank does. But Tether doesn’t have a banking license. 

To demonstrate my concern:

- Someone gives Tether 10 million USD

- That someone receives 10 million USDT so he can trade on all exchanges

- Someone else borrows 5 million USD from Tether (the “loan” part from their updated website)

- That person now buys bitcoin with it for example (still no problem up until this point)

- Bitcoin loses 50% of its value in just 2 weeks time (this becomes a problem)

How is Tether supposed to get its money back? They’re basically running a fractional reserve just like a bank, only without the proper licensing.

I’m expecting some government (probably the US because the DoJ is already looking into it) will eventually try to shutdown this shady operation. That won’t end pretty, because at time of writing 83% of all bitcoin trading volume is due to Tether, according to <strong>CryptoCompare</strong>. The picture below comes from <strong>Coinlib</strong>.

<center>https://cdn.steemitimages.com/DQmQvf43grW9HAcJM7UcXvMZNXDN63HgoKPyQFYaFNQuCiY/image.png</center>
<center><sub>Coinlib</sub></center>

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<em>This is not financial advice. I don’t take into account of your personal investment objectives, specific investment goals, specific needs or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation. Any expression of opinion (which may be subject to change without notice) is personal to the author and the author makes no guarantee of any sort regarding accuracy or completeness of any information or analysis supplied.</em>

<center>https://cdn.steemitimages.com/DQmbcARYLPh4SZVbZGKaauLLkzAppr6DRX6xYsTzPPmDCuA/viperblckz-000316.jpg</center>

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