While there's no definitive point where the lies begin and end, we know that Tether has been dishonest about how USDT is backed. Firstly, Tether has a very casual relationship with the truth. Circle has earned public trust by upholding a positive reputation, but Tether is embroiled in controversy and stands as the embodiment of everything that can go wrong with unregulated centralization. The same applies to Tether and its relationship to USDT. This meant Tether lied about how USDT was backed, which has now culminated in them getting a $41 million fine from the US Commodity Futures Trading Commission. A crucial revelation from the trial occurred when Tether's legal counsel admitted that less than three-fourths of all USDT was adequately backed by fiat. Tether was able to get away virtually scot-free-an $18.5 million fine is basically a slap on the wrist-but this marked only the beginning of Tether's legal trouble. Tether couldn't deliver a rational defense for not adequately backing their tokens with USD, so they instead antagonized the Attorney General as a way to feign victimhood and absolve themselves of responsibility. This led to the New York Attorney General putting them in the hot seat when it was discovered that Tether was lending out its cash reserves. First, Tether was hacked to the tune of 31 million USDT in 2017 and the company initiated an "emergency hard-fork" to brush it under the rug and save face rather than demonstrate accountability. Bitfinex just recently finished paying a half-billion-dollar loan to Tether which was meant to help recover from the hack.Īside from its questionable relationship to hacked exchanges like Bitfinex and Bitstamp, Tether is the epicenter of controversies all its own. For one, Tether has a close relationship with the Bitfinex exchange, which experienced one of the biggest security breaches in crypto history. Unlike Circle, Tether has had trouble displaying sufficient transparency and accountability in its stablecoin issuing business. While USDC does keep you safe from volatility, having a central authority retain control over your money sort of defeats the point of crypto. Circle exercises full control over every USDC, which means they can change the market cap or stablecoin supply and have the right to revoke or void tokens for any reason. While USDC gives your dollars the freedom of blockchain, it is not 100% trustless or decentralized. Stablecoins like USDC also enable decentralized finance (DeFi) for users who don't want exposure to volatile crypto assets. Before stablecoins, gains could only be realized by offloading crypto on a centralized exchange, but now users can use decentralized exchanges (Dex) to trade for stablecoins without needing to take assets off the blockchain. The introduction of stablecoins like USDC curbs the volatility of the digital assets market since it eliminates the need for centralized exchanges. USDC is the best of both worlds, providing the utility of cryptocurrency and the stability of fiat money. Other than the fact that USDC's value is derived from USD, the major distinction is that Circle exercises full control over USDC. Centre is the only company that can create or destroy USD coin, sort of like how the Federal Reserve controls USD-the USDC supply is effectively determined by Centre. USDC is issued and controlled by the Centre consortium, an entity founded by Circle and Coinbase.
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