Tether: a response to Binance’s decision to block USDC

Yesterday, 6 September, the company Tether, the creator of the most widely used stablecoin – USDT – pegged to the US dollar, published a lengthy blog post titled “How tether keeps the US Dollar strong”.

The purpose of Tether’s stablecoin

“Stablecoins are one of the most substantial innovations in how currencies, specifically the US Dollar, are used and made available to the world. It is no secret that the US Dollar is the most sought-after fiat currency in the world, yet despite that fact, it is still challenging for individuals to hold or acquire dollars in many countries outside of the United States.” 

reads the opening of the article published yesterday.

Indeed, in some countries it is difficult to move money because of unfavorable exchange rates, high inflation of the local currency or too high foreign exchange fees.

Cryptocurrencies help with this, and all the more so does a stablecoin, which by its nature is worth 1:1 with a fiat currency, in this case the dollar, and therefore less volatile and safer in that sense than other cryptocurrencies.

That is why in the Tether blog he states that:

“not only created a way for people to access dollars as a tool for financial freedom it has created a system that strengthens the US Dollar.”

In addition, it is important to note that Tether buys dollars very often so that every time new USDT are issued in the market they match as many dollars in their coffers. For example, last May USDT constituted 2% of the total US Treasury, more than the world’s largest holding company, Berkshire Hathaway.

Tether like the Petrodollar

Much as in the 1970s the US government secured the future of the dollar using the Petrodollar system, equally today Tether does so through stablecoins.

This mode allows multiple states to be able to trade with America, and this has stabilized the US dollar for about 30 years.

“USD₮ provides the United States with a similar tool that the Petrodollar regime offered for the digital era. Many advantages that the US gained from the Petrodollar system and the role of US treasuries as a global reserve asset can be replicated with USD₮ and other stablecoins.”

the blog reads.

Tether and audits for USDT reserves

This blog post certainly responds to the many allegations Tether has received over the years, not the least of which was the false SEC document identifying USDT as a security.

Even in June, when the collapse of the UST stablecoin in the Terra-Luna ecosystem had occurred, Tether had paid the price by getting involved because of the existing pair on some futures exchanges between USDT and USD.

Tether has also always had problems with justice, like its problem with NYAG or the 41 million fine by the CFTC.

For these reasons and all the haters, Tether is very diligent in communicating about its reserves and often publishes new audits that attest that the stablecoin is indeed pegged to the USD. 

In short, this blog post seems like a way to respond to the frequent accusations toward the project, thus specifying Tether’s importance in the crypto and financial ecosystem in general.

USDC delisted from Binance 

But the timing of the publication of this article is a bit “suspicious”. Just as yesterday USDC was delisted from Binance, Tether brings out the article.

The Binance exchange announced yesterday that it will convert the three stablecoins USDC, USDP and TUSD into its own stablecoin BUSD. Tether for the time being would be excluded from this conversion although, according to some rumors, it will soon be added. 

A Binance spokesperson reportedly told Cointelegraph, “We do not have plans to auto-convert USDT to BUSD as of now, but may change”.

The company’s stated goal would be to improve liquidity and capital efficiency for users, although this is a rather strong and “centralized” move

USDC is the dollar-pegged stablecoin that competes most closely with USDT in terms of market cap. In fact, USDC is currently the second largest in the world, with a market capitalization of nearly $52 billion, while BUSD has a capitalization of only $19 billion, so the move seems mostly made to bring value to the stablecoin created by Binance itself.

In fact, to specify, the move could have been justified in the case of USDP and TUSD, which have market capitalizations of less than a billion, but certainly not for USDC, which is a worthy opponent of BUSD. 

In any case, returning to Tether, the blog post was published yesterday, after this big announcement by Binance and so it would seem to be a response to this very move by the exchange, to dot the i’s on the importance of USDT, but also indirectly on the broader stablecoin sector.