Cryptocurrency advocate and billionaire investor Mike Novogratz says Tether’s recent troubles are its own fault, and that a lack of transparency is mainly to blame for investors losing faith in the stablecoin.
Billionaire investor Mike Novogratz, one of the best-known advocates of cryptocurrencies, blamed controversial "stable coin" Tether for its own recent woes https://t.co/P4LmHrKy3o pic.twitter.com/RD9VshtyQl
— Bloomberg Australia (@BloombergAU) October 18, 2018
Tether’s Dip This Week
This week Tether’s USDT cryptocurrency, allegedly backed by the U.S. dollar, experienced a drop in value amid doubts that the company really did have the funds to back every coin with a U.S. dollar. That drop, which is holding around $1 USD, precipitated another ballooning in Bitcoin’s market value earlier this week.
Tether was the first stablecoin, and has been around since 2014. The company has steadfastly denied any claims that it does not have adequate reserves and released a report in June of this year appears to show that they could back every Tether in circulation with one U.S. dollar. CEO Jan Ludovicus stated in an interview with The Independent at that time that:
“Despite speculation, we have consistently stated that tether is backed by USD reserves at or exceeding te tethers in circulation at a given moment, and we’re glad to have independent verification of this so [as to] answer some of the questions posed by the public.”
Despite that, Novogratz thinks the company hasn’t done a sufficient enough of a job at keeping their business practices transparent, noting during a conference in Frankfurt, Germany that Tether operates off-shore. Novogratz stated that because of Tether’s recent troubles, any new stable coin would need “time to regain trust,” according to Bloomberg.
Novogratz didn’t completely bash the concept of a stablecoin, however, saying it “makes sense” given their more transactional nature as opposed to other cryptocurrencies not backed by fiat. He expressed a leaning for Gemini because it had a U.S.-based bank State Street as a correspondent.
Tether Says it’s Working to Provide More Transparency
For its part, Tether seems to be working on providing more transparency to its customers. The company has devoted a page on their website to show how much Tether is holding in USD and EU for holders of Tether to compare with the amount of USDT in circulation. Tether told the Independent in June:
“We are planning to build on this report moving forward and, despite the challenges of applying current accounting and assurance standards to cryptocurrency clients, we continue to discuss these issues with potential audit partners.”
That claim was made murky by the fact that the firm who conducted the report issued a statement afterward stating that:
“The above confirmation of bank and Tether balances should not be construed as the results of an audit and were not conducted in accordance with Generally Accepted Auditing Standards.”
Tether’s market value is currently around $0.96 USD after a dip to $0.92 on Monday. During the conference Novogratz also defended crypto against recent criticism by economist Nouriel Roubini, saying:
“You can agree with Roubini on several points, but he is judging cryptocurrencies as if it was a PhD student. Cryptocurrencies are third- or fourth-graders, so still in need to mature.”
As seen with Fidelity Investments’ recent launch of its crypto branch Fidelity Digital Assets, he cited the involvement of more prominent institutions acting as custodians in the cryptocurrency space would drive that much-needed maturation.
Novogratz clarified his position on Tether and tried to dissuade any FUD via the following tweet:
Id like to put context to these quotes as the last thing I want to do is spread FUD. I said I thought tether has a dollar for every tether and that we actively traded it. The fact that almost $700mm has been redeemed in an orderly fashion is important. https://t.co/SrMa6uPpr6
— Michael Novogratz (@novogratz) October 19, 2018
Cover Photo by Jaanus Jagomägi on Unsplash