By way of background, the idea of Tether is that it has parity with the USD to facilitate blockchain transactions. Sending Tether to a crypto-exchange is far easier and faster than sending USD and the user can theoretically hold Tether and have confidence in its 1 for 1 value with the dollar while moving in and out of other assets. The issue at stake has always been whether in fact Tether is indeed backed 1 for 1 by dollars.

ListedReserve’s Block20 fund does not invest in Tether, however I read their announcement this week that they had finally managed to find an independent party willing to verify their USD balances. Full document can be found here https://tether.to/wp-content/uploads/2018/06/FSS1JUN18-Account-Snapshot-Statement-final-15JUN18.pdf

Interestingly, the law firm undertaking the work Freeh, Sporkin & Sullivan LLP has former FBI staffers amongst its partners. Perhaps they saw the success of the Silk Road and wanted a change of career.

Two points crossed my mind reading it. The first, what a huge amount of money has been amassed in bank accounts behind tether, $2.5 billion, not trivial and any other new business able to achieve such a feat would be lauded. Not so in this sector however, which leads to my second observation around the principal criticism levelled at Tether which can even be found on the its Wikipedia entry:

A blockchain critic has raised questions about the relationship between Bitfinex and Tether, accusing Bitfinex of creating “magic Tethers out of thin air”.

I make no assertion about the quality of this intervention from the “blockchain critic” and it may well turn out to have merit but the point is that this exactly what the Federal Reserve does every single day and every other Central Bank for that matter. Without restraint, they can and do print money.

If we take a modest measure of the US money supply (M2 – so physical money plus short term deposits) it has doubled since 2008 during which period US GDP grew only 35%. How has that happened? Well, it was basically created out of thin air by the Federal Reserve.

Ultimately, most of the criticism that Tether faces could equally be levelled at Central banks “they just print more of them”, “it’s very opaque”, “nobody really knows how many of these things there are”, sound familiar?  So next time you hear Tether under fire ask yourself this, does that same criticism apply to my national currency and my central bank? The answer will probably be yes.