Recently yesterday around in the evening, Tether [USDT], the corporate behind the dollar-linked stablecoin of similar name, announced via its official tweet that it had destroyed around five hundred million USDT tokens.
Earlier, these USDT tokens were held in an account called the ‘Tether Treasury.’ The past few weeks have seen large influxes of USDT to the Treasury, significantly when the cryptocurrency lost parity with the USD last week amid questions on Tether’s access to banking services.
From 14th Oct., after Tether [USDT] began to slip below $1.00 USD, to 23rd Oct., 680 Mln USDT were transferred to the company-controlled Treasury digital wallet. All of those transfers came from an associated address controlled by cryptocurrency Bitfinex, that overlaps with Tether in terms of possession and management.
Bitfinex’s cold wallet’s balance has fallen by around a hundred thousand Bitcoin [BTC] since early Sept., leading some to speculate that the exchange has been selling bitcoins so as to move USDT off the market – maybe to push the rate back towards the $1.00 USD mark, or even perhaps to exit the stablecoin business entirely.
As a results of these transfers, the Tether [USDT] supply in circulation has fell by around 1/4 th in a week and half, close to $2 Bln. Currently several of these tokens, additionally to having been taken out of circulation, are “burned” or destroyed by the corporate.
Kasper Rasmussen, Bitfinex’s director of communications, said the action “don’t have anything with defending USD parity,” since each the exchange and Tether guarantee 1-for-1 redemptions. He denied that Tether is purposely scaling back the supply.
USDT tokens are ransomed “when the number in circulation exceeds the number needed for e.g. Bitfinex or Tether to work,” Rasmussen further added, and therefore the reason most of the destroyed tokens came from Bitfinex’s wallet is that “Bitfinex is one of the major customers of Tether.”
In its recent announcement on yesterday, USDT announced that it had not burned all of the USDT tokens within the Treasury account, while around 466 Mln USDT stay within the account “as a preparative assurance for the future USDT issuances.”
The announcement characterised transfers of Tether [USDT] to the Treasury as “redemption,” a method that Tether outlined in its original white paper.
The 2016 white paper outlines that USDT holders would be able to redeem their tokens for USD directly with the corporate. Tether maintains that each USDT token is backed by a U.S. dollar deposit, but has not convinced several questioner that the cryptocurrency is really totally collateralized.
The anonymous anti-Tether politico “Bitfinex’ed,” however, controversial Tether’s characterization of transfers to the Treasury as a “redemption,” writing: “Not one person can come out and say that they regenerate Tethers to USD and got wired cash from Tether.”
Rasmussen, the Bitfinex representative, claimed otherwise, stating that: “Yes, direct customers of Tether are able to redeem USDT through Tether Ltd.”
But many others still disagree that it’s not possible to redeem USDT tokens for U.S. dollars with USDT.