A newly published statement on the website of so-called stablecoin Tether (USDT) has confirmed the launch of a “re-designed platform allowing for the verification of new customers and direct redemption of Tether to fiat” on a one-to-one ratio.
We have a big announcement! Today we are proud to launch a redesigned platform for the verification of new customers and direct redemption of Tether to fiat via https://t.co/XS46TbUCuL.
To find out more, head to https://t.co/Nn3WUrnRuA.
— Tether (@Tether_to) November 27, 2018
The move comes in the wake of months of speculation focused on Tether’s operating model and whether sufficient funds are actually available to back up the $1.8bn worth of USDT currently in circulation.
The website’s statement appears to suggest that the coin was a victim of its own success as “Tether grew at an unpredicted rate, quickly making the initial model (enabling redemption of Tether to fiat through its native platform) unsustainable.”
Fractional Banking Model
Whilst the new liquidity model appears designed to provide reassurance for holders of Tether, for others the new development remains in line with suspicions held by many that Tether is practising a fractional banking model – despite previous claims from the Tether team itself that the crypto-currency is fully backed by USD reserves.
More ominously still, according to CryptoCoinSpy, Tether appears to have recently removed its description of USDT as a “regularly audited” crypto-currency from its FAQ page.
In its statement, Tether claims that its new initiative is “designed with Tether’s professional investor audience in mind” and so comes with a substantial minimum issuance and redemption level of $100,000, with the limit of just one redemption per week.
A high fee is also charged for those wishing to use the service, meaning users will be charged at least $1,000 to transact rising to a 3% charge for a transfer of $10 million or more.
Industry observers have been watching for signs of large movements of USDT holdings in an attempt to gauge how successful the new platform becomes.
The use of Tether is currently being investigated by the US Justice Department to see if it played a role in the manipulation of the cryptocurrency markets in 2017-18.
Many leading crypto-currency exchanges offer fiat-to-USDT purchasing mechanisms but rarely offer the same service in the opposing direction.