Tether is a cryptocurrency exchange that offers a coin, the tether, that is tied to the United States dollar. That’s what’s called a “stablecoin.” Because they are worth the same as one dollar, stablecoins allow cryptocurrencies to buy and sell positions in different cryptocurrencies without having to cash out from the exchange and deposit actual dollars into a bank account, only to withdraw them again. That creates a taxable event involving capital gains, so it’s much easier and less expensive to exchange one crypto asset for another crypto asset for another because that’s a nontaxable like-kind exchange. However, it only works as long as the stablecoin is truly backed up by a US dollar. Read more on bitcoin about Ian King at Banyanhill.
In a recent article for Banyan Hill Publishing, Ian King warns his readers about possible misbehavior on the part of the Tether exchange. According to Tether’s website, the last audit was conducted on September 15. The accounting firm found $443 million to back up 420 billion tethers. That’s great so far. But that accounting firm has since stopped working for Tether. Also, Tether has issued a total of at least 2.2 billion tethers. Do they have $2.2 billion in a bank account to back up those 2.2 billion tethers?
The United States Commodity Futures Trading Commission sent subpoenas to the group that own both Tether and Bitfinex, another exchange with the same CEO. So far, there have been no results announced from the subpoenas. Check: https://www.tumblr.com/blog/iankingguru
If Tether really has issued more tethers than it has US dollars to back them up, that’s an ironical situation. That’s the kind of money manipulation bitcoin was created to eliminate. Our current paper money began as receipts for gold held by the local goldsmith, before banks were invented. Gold is heavy and subject to theft. In the old days, even a small gold coin was probably worth a lot more than bushels of wheat in a market, dresses in a store or beer in a tavern, making it difficult to spend for such small transactions. Therefore, people let the local goldsmith hold it in secure storage. The goldsmith gave receipts for the amount of gold. When people did business, they would just sign their receipts over to each other because that was easier than taking it out of storage, handing it over to the other party, who then had to put it back in secure storage. So dishonest goldsmiths could issue more receipts than they had gold in storage.
Read this article at Investopedia about Ian King