The world of cryptocurrency has earned a shadowy reputation, and it’s not entirely undeserved. Consider bitcoin, with its anonymous founder and its early role in online black markets like Silk Road. But perhaps no cryptocurrency is as enigmatic as Tether, which involves $814 million that may or may not even exist.
According to a report published Tuesday in Bloomberg, the U.S. Commodity Futures Trading Commission sent subpoenas back in December to the company behind Tether as well as the Bitfinex cryptocurrency exchange. The two share a chief executive officer, though little else is certain about Tether.
Since its launch in 2015, Tether has carved out a unique niche in the cryptocurrency space by offering a coin that explicitly can’t experience the rapid price increases that bitcoin and other tokens have. Instead, Tether is pegged — tethered, if you will — directly to the U.S. dollar, with one tether held roughly equal to one dollar.
Instead of relying on the digital scarcity and the blockchain to derive its value, Tether instead claims that every one of its coins in circulation is backed by a dollar the company holds in reserve. Since there are 814 million tethers, it follows the company must have $814 million stashed away somewhere.
At the risk of understatement, that’s quite a bit of money, and the company has never actually provided any concrete documentation that it has such holdings. It most recently claimed to hold $443 million in bank accounts as of September 2017, though the specific banks were blacked out on the financial document posted to its website. The accounting firm behind that document later cut ties with Tether, with the latter claiming the audit was unnecessarily detailed and could not be completed in a reasonable timeframe.
This isn’t just a question of one isolated cryptocurrency that can’t back up its claims. Tether has emerged as a popular alternative to the dollar for people looking to exchange bitcoins without the hassle of transferring directly to a fiat currency, with the Taiwan-based Bitfinex exchange as the main hub of activity. If Tether collapses under regulatory scrutiny, that could hurt the value of cryptocurrencies like bitcoin, which are already crashing after weeks of generally bad news.
As Bloomberg notes, it doesn’t help that neither Tether nor Bitfinex makes it easy to work out much of anything about them, with neither publicly listing who is in charge. A spokesperson revealed Jan Ludovicus van der Velde is the CEO of both companies, though he’s little more than a name — or, considering it’s sometimes given as Jean-Louis van der Velde, two names — and a handful of past jobs on a LinkedIn page.
The Commodity Futures Trading Commission declined to comment to Bloomberg and likely won’t have anything to say until its investigation is concluded. What it turns up could prove the cryptocurrency world, for all its secrets, is more reliable than its detractors give it credit for — or shake the entire edifice to its core.