Tether, the most popular stablecoin recently made changes to its terms of services. The company which claims that every coin is backed by the USD has been a subject of debates questioning the veracity of that claim.
In its most recent adjustment, the terms of service stated that aside the USD, tether would be backed by other assets which means that the company is exploring and exploiting its options considering that stablecoin business may not be among the most profitable.
The new ToS states that,
“Every tether is always 100% 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”),”
A company representative announced that the change was made weeks ago and that the composition of assets backing the stable coin has changed.
Even though he didn’t state the reason, analysts are of the opinion that economy is mainly responsible. Tether has been accused in the past of minting its stablecoin out of thin air whenever it feels it is convenient.
There was even a study that linked the massive 2017 Bitcoin bull-run to the minting of fresh Tether even though the report wasn’t conclusive. Investigations have not shown that the company broke any laws but it is clear that a company like that has to adopt viable strategies for expansion.
The most recent debate around the ToS concerns the sort of loans offered by Tether. One researcher explained a likely scenario:
“We have $2 billion in a checking account, which is really silly and we’re still a for-profit company so let’s loan out a part of that $2 billion and earn some interest on it,”
Kasper Rasmussen, the director of marketing at iFinex, the parent company of Bitfinex stated that,
“Tethers remain completely stable and 100% backed, so Tether’s reserves always equal or exceed the number of issued Tethers. The only change is that the composition of the assets that provide that backing includes a combination of cash, cash equivalents, and may also include other assets or receivables from loans issued by Tether.”
The arguments are mainly economics bordering on what the company is doing to ensure that loans are protected and even profitable. The reason is clearly the risk factor: is my Tether backed by anything?