Calls are growing louder for Binance and other major exchanges to delist Tether in the light of serious fraud allegations and new revelations about its fiat reserves.
Swiss crypto exchange IQFinex today announced it will delist Tether in favour of USD Coin and Coinbase CEO Brian Armstrong has also recommended users shift to more ‘trustworthy stablecoins” such as USDC.
IQFinex will delist USDT (Tether) from the platform.
The delisting will be done on the 3rd of May.
All pairs BTC/USDT, BCH/USDT, ETH/USDT, LTC/USDT, EOS/USDT, ETC/USDT, XLM/USDT will be closed for trading.
Withdrawal will be supported till 20th of May.#IQFinex pic.twitter.com/tPQUHLiM1o
— IQFinex (@IQFinexcom) May 2, 2019
However, there are also concerns a rush to delist USDT would destabilise crypto markets.
Binance delisted Bitcoin SV, so why not Tether?
Many of the calls to delist are directed at Binance, after CEO Changpeng Zhao made a captain’s call to delist Bitcoin SV recently. The delisting followed developer Craig Wright’s threats to sue anyone who doubts he’s Satoshi Nakamoto (pretty much everyone at this point). Kraken soon followed suit.
— Soleil #DelistTether (@soleil_dusoir9) April 28, 2019
“Why expose your users to a fraudulent coin @cz_binance?” asked Twitter user Soleil.
“It is time for you to show if you are truly a leader or simply another crypto opportunist. #delisttether”
Serious allegations against Tether
Many users pointed out that Wright’s behaviour is an order of magnitude smaller than the fraud Tether and Bitfinex have been accused of.
The New York Attorney General’s (NYAG) office has alleged that Bitfinex and Tether “may have defrauded” investors by taking money from Tether’s cash reserves to hide the “apparent loss” of US$850 million (A$1.2 billion). (Bitfinex queried whether there even was a “loss” and claimed the filings were “written in bad faith and are riddled with false assertions”).
The news caused the Bitcoin price to plunge, and doubts over Tether have been responsible for considerable periods of market volatility over the past 18 months.
Twitter user Rob Saunders asked “@cz_binance so you want to delist scam coins that are bad for the industry? I’ve got a far bigger one for you than SV – @Tether_to and we all know it.”
Binance’s criteria for delisting coins includes: “Evidence of unethical / fraudulent conduct”.
USDT only has 74% fiat and equivalents backing
After claiming for years to be backed 1:1 with US dollars (though they altered that assertion on their website recently) Tether’s general counsel Stuart Hoegner this week disclosed in an affidavit that Tether is actually only 74 percent backed with fiat and equivalents.
“As of the date (April 30) I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.”
The #delisttether campaign gathered new momentum today after IQFinex announced it is dropping Tether. IQFinex is a relatively small exchange however, and only turns over around a million dollars US each day.
Coinbase CEO suggests USDC instead
The CEO of Coinbase, Brian Armstrong, also tweeted his concerns about USDT: “With the confirmation that Tether is not fully collateralized, my hope is that the industry graduates to more trustworthy stablecoins.”
He linked to USD Coin, which unlike Tether, is actually backed 1:1 with US dollars.
With the confirmation that Tether is not fully collateralized, my hope is that the industry graduates to more trusthworthy stablecoins, including https://t.co/lZQKCUDjAH
One more piece of reliable infrastructure to help build the open financial system.
— Brian Armstrong (@brian_armstrong) May 1, 2019
Delist Tether running hot on Reddit
The issue has also been running hot on Reddit forums, including ‘Cryptocurrency’ where Crypto_Buddah yesterday posed the question: “In light of Tether’s vast negligence, should the community call on exchanges to delist?”
The post has been up-voted 480 times and attracted 387 comments so far.
User ‘Mbate22’ argued the fate of Tether could rest in CZ’s hands.
“He’s in a position to be judge jury and executioner. USDT gets delisted from Binance there wouldn’t be much chance of making a comeback.”
‘Rudtjeban’ said arguments that banks have been doing similar “fractional reserve bla bla bla” for years “completely misses the point.”
“Tether is a shady business, and it should be delisted by big crypto exchanges. It’s harmful to the entire ecosystem.”
However there’s considerable pushback from crypto enthusiasts concerned that any rush to delist Tether – and there are 2.6 billion outstanding – would cause the bear market to extend for multiple years.
Reddit user ‘rekkkttt’ cautioned against making any sudden moves.
“I think it should be phased out and not pulled too quickly. They just need to take the next step of limiting the pairs for USDT until it’s nothing more than a forgotten sh*tcoin. This would incentivise people to pull out of it but not cause a major panic (hopefully).”