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Summary
- A stablecoin is a digital currency tied to the fiat currency of a country, like the US dollar.
- A key reason people may put money into a stablecoin like Tether is that it’s cheaper and faster to convert from one crypto to another.
- The NYAG issued Tether a US$18.5 million fine for the transgression and banned them from operating out of New York.
- While Tether has its critics, it’s widely accepted that, although Tether isn’t one hundred per cent backed, it’s at least 74% backed.
While cryptocurrencies like Bitcoin have experienced extreme volatility, not all digital currencies are subject to the same influences and offer much less risk.
What is a stablecoin?
A stablecoin is a digital currency tied to the fiat currency of a country, like the US dollar. In some cases, it can be tied to a precious metal such as gold or silver.
The most well-known of all the stablecoins is Tether (USDT), created by Brock Pierce, Reeve Collins, and Craig Sellars in 2014.
Tether was originally touted as being tied directly to the US dollar, meaning its price will always be equal to one American dollar.
Source: © Burdun | Megapixl.com
ALSO READ: All you need to know about stablecoin
What’s the point?
There are a couple of reasons why someone would want to invest in a stablecoin. Firstly, it protects against inflation and is better than keeping money in a bank account.
Secondly, suppose a person wishes to use digital currency to pay for goods and services online. In that case, stablecoins offer a haven for your money, and they don’t need to worry about their money being worth dramatically more or less due to a sudden violent shift in the market.
Another reason people may put money into a stablecoin like Tether is that it’s cheaper and faster to convert from one crypto to another. So, if a person in the US wishes to buy a cryptocurrency that doesn’t accept US dollars, that person can then pay in Tether.
Is Tether safe?
In February 2021, Tether released a report ensuring investors they were fully backed by cash reserves, amidst rumours surrounding the stablecoin’s legitimacy.
Unfortunately, when the New York Attorney General (NYAG) read the report, it prompted an investigation. It was discovered that the cash backing outlined in the report was generated through deceitful means. In fact, the investigation discovered Tether had loaded a large amount of cash into a couple of bank accounts - days before the independent accountant searched through their books – and dumped the cash as soon as the accountant was finished.
Source: © Awargula | Megapixl.com
The NYAG issued Tether a US$18.5 million fine for the transgression and banned them from operating out of New York.
Tether has since released a report claiming that 76% of its reserves are in cash or “cash equivalents”.
While Tether has its critics, it’s widely accepted that, although Tether isn’t one hundred per cent backed, it’s at least 74% backed. Moreover, many traders rely on Tether to be valued at one dollar, making it the most reliable cryptocurrency in the market.
