Tether, a USD-backed stable coin, which owners claim is backed one-to-one by US fiat reserves has had a turbulent 2019, and is now set to face a tough 12 months as rival stable coins join the market.
In March, Tether was slammed after the company quietly updated the language on its home page that described how each USDT coin was backed by a ‘real’ USD.
While in April it faced a scathing attack from the New York Attorney General’s Office, in the US, after they said cryptocurrency exchange Bitfinex, which is operated by iFenix Inc, the owners of Tether, had raided its reserves of Tether to cover a $850 million hole in its finances.
Leading cryptocurrency analyst Joseph Young to tweet:
This is why a stablecoin has to be transparent in every area with public reports.
Good thing the market is not only dependent on Tether but well regulated stablecoins like Gemini Dollar and Circle’s USDC.
More coins, more competition
Now, Tether faces further threats to its market share with the launch of another stable coin, the USDK, a coin launched by global settlement company OKLink, in partnership with US custody provider Prime Trust, and available on the OKEx and Bitfenix exchanges.
As of press time USDK had done $14.5m in 24-hour traded volume, way down from Tether’s $21.5bn 24-hour traded volume, but it represents another stable coin in a market that already features more than 20, and is potentially another chink in Tether’s armor.
The real threat
Announced on Tuesday, Tether and every other stable coin could face a real existential threat from Libra, the Facebook-led project that has so far gained the backing of 27 global organizations including Visa, Stripe and Paypal.
Run by the Libra Association the Libra will be a global currency that aims to simplify cross border payments and provide banking services to those who currently have no access to them.
Facebook’s huge reach and 2.4 billion (and growing) user base means governments and central banks are worried about the impact Libra could have on the legacy financial system.
Within hours of being announced the French Finance Minister, Bruno Le Maire, said it was “out of the question” that Libra become a “sovereign currency”, while Markus Ferber, a German member of the European Parliament said Facebook could become a “shadow bank”.
It’s clear in the months ahead Tether faces a growing number of threats to existence, as do potentially all stable coins.