Tether Says Its Stablecoin Is 'Fully Backed' Again

USDT tokens are now fully backed by Tether's reserves, the stablecoin issuer said Thursday.

Tether published a response to what it described as "a flawed paper" written by John Griffin, a professor of finance at the University of Texas at Austin, and Amin Shams, an instructor the Ohio State University which claimed a single address on the Bitfinex exchange was responsible for manipulating the bitcoin market in late 2017, sparking the bull market.

Perhaps more intriguing was the claim that "All Tether tokens are fully backed by reserves."

Tether maintained that its tokens were fully backed until April 2019, when general counsel Stuart Hoegner wrote in an affidavit that USDT was backed by "Cash and cash equivalents representing approximately 74 percent of the current outstanding tethers."

At the time, Tether held $2.1 billion in assets, with 2.8 billion USDT tokens issued on the Omni blockchain.

As for the actual paper that Griffin and Shams hope to see published in the Journal of Finance, Tether's statement Thursday said "The authors demonstrate a fundamental lack of understanding of the cryptocurrency marketplace and the demand that drives Tether token purchases."

The paper suffers from having incomplete data, including insufficient data on capital flow or transaction timing, Tether said Thursday.

"Furthermore, the authors now admit that the patterns of trading they observed could be consistent with the market purchase of Tethers, as opposed to the issuance of unbacked Tethers. Importantly, the authors do not possess or reference any data disputing that Tether has sufficient reserves to back up Tether token issuances in circulation," the statement said.

While the paper notes that "Some in the blogosphere and press" have expressed doubts on whether Tether is fully backed, it adds that "The cryptocurrency exchanges largely reject such concerns." However, it later says its model and results "Are generally consistent with Tether being printed unbacked and pushed out onto the market."

The paper has received skepticism and pushback from the crypto industry, with Tether skeptic Bennett Tomlin even calling it "Inconclusive."