Joseph Lubin – a founding father of Ethereum and one of the most respected voices in the cryptocurrency space – is using his status and muscle to support Tether, a currency that’s facing pointed fingers and prying eyes across the board.
Tether is one of the cryptocurrency market’s biggest controversies. A self-described “stable coin,” Tether alleges that it is backed by the U.S. dollar, and thus holds stronger support in what is an otherwise vulnerable and extremely volatile market. It’s pairing with U.S.-based fiat currency allows it to retain more of its value and resist factors that would cause less stable digital assets, such as bitcoin and Ethereum, to fall without warning.
But now, Tether is facing new accusations. Only a few months ago, finance professor at the University of Texas John Griffin issued a new report that suggested Tether was being used to manipulate the bitcoin price. In the report, Griffin claims that Tether was bought in spades throughout the bitcoin boom of 2017. The currency reached its peak price of nearly $20,000 in December of that year, and many thought the currency was finally earning the recognition and respect it deserved.
Why Did Bitcoin Rise So Fast?
Unfortunately, recognition amongst both institutional and individual investors may not have been a factor in bitcoin’s sudden ascension. Griffin asserts that whenever bitcoin’s price fell, even by a small or marginal value, investors used Tether to purchase the asset, thereby pairing it with the alleged USD-backed currency and helping to boost its price up. Now, organizations such as the Securities and Exchange Commission (SEC) are looking into the claims of manipulation to see if any fraud or wrong-doing did occur, though Tether executives continue to claim the allegations are false and misleading.
Ethereum co-founder Joseph Lubin appears to be one of Tether’s few allies. Since parting ways with his original team, Lubin has gone on to form ConsenSys, an Ethereum-based development studio that currently boasts over 1,100 employees. In a recent interview, Lubin claims his belief that USDT is indeed backed by physical dollars on a one-to-one ratio, just as Tether’s executives have so often stated.
Maybe Market Manipulation Isn’t Real…
“Tether is an interesting project. Based on our analysis, which involves just talking to a bunch of people in the space, we do believe that tethers are backed one-to-one by U.S. dollars in bank accounts. With respect to market manipulations, I’m not sure that market manipulations are related to Tether directly if they do exist.”
Interestingly, Lubin appears to insinuate that market manipulation is a figment of investors’ imaginations, and that the possibilities of such manipulation couldn’t exist on such a grand scale. However, he does admit that if market manipulation were to occur at any point, it would likely stem from the fact that most digital exchanges lack the regulation and supervision of traditional financial institutions:
“Ideally, we’ll get a little better regulation of those centralized exchanges, at least, and we’ll see less sloshing around in price.”
Has Tether’s Rule About to Come to an End?
Lubin further went on to comment that he believes Tether will one day be overpowered by other, more technologically advanced stable coins.
The team behind Tether has yet to release an independent audit refuting the allegations, though executives have hired U.S. law firm Freeh, Sporkin & Sullivan founded by former FBI director Louis Freeh to examine its financial situation and compliance history. As of early June, the company does appear to be holding enough USD to cover its outstanding tokens.
Still, many critics remain unsatisfied, and believe a day of reckoning is heading towards Tether’s doorstep.