Stablecoin Issuer Tether Explains How FTX and Alameda Collapse Has No Effect on USDT
Tether, the largest stablecoin issuer in the world, has released a statement assuring investors that USDT is in no way affected by the meltdown of crypto exchange FTX and its trading arm Alameda Research.
In a new blog post, Tether says that since Alameda was a large issuer of USDT, speculation on whether the trading firm’s collapse presents a risk to Tether has surfaced.
Tether says that Alameda being an issuer of USDT means that Alameda originally sent USD to Tether, and received USDT in return. Now, the only option Alameda has is to return USDT to Tether to be reimbursed in USD.
“Those reserves are still in Tether’s possession; they are not on Alameda’s balance sheet. The collateral backing Alameda’s USDT is not on Alameda’s balance sheet.
What can Alameda do with their USDT? Their only option is to redeem any USDT they have for USD via Tether’s redemption facility. This is the same as any other USDT holder around the world…
Tether has no outstanding loans of USDT, of Tether’s reserves, or of any other funds whatsoever.
The main problem countless other companies are facing is that they recklessly lent Alameda various assets relying on extremely illiquid collateral. Since Alameda cannot repay those loans at this time, those companies have a hole on their balance sheet. This is not how USDT issuance works, and is not behavior Tether engaged in with Alameda in any way.”
The Hong Kong-based company also addresses the decision from multiple crypto exchanges to halt deposits of USDT on the Solana (SOL) blockchain. Tether says this also does not affect it.
“USDT issued on Solana is the same as USDT issued on any other chain. The token simply represents a claim to $1 of Tether’s reserves and collateral. Alameda’s heavy involvement in Solana doesn’t impact the underlying dynamics of how USDT functions and USDT issuance works whatsoever.
The move to suspend USDT deposits on these exchanges is likely just due to the heavy connections between FTX, Alameda, and Solana. If holders of USD? want to redeem USDT with Tether, they still can. USDT on Solana is equivalent to USDT on any other Blockchain, it is not issued by Solana and is not reserved by Alameda or FTX.”
On Friday, Tether announced a chain swap of $1 billion worth of USDT from Solana to Ethereum.
In few minutes Tether will coordinate with a 3rd party to perform a chain swap, converting from Solana to Ethereum ERC20, for 1B USDt. The #tether total supply will not change during this process.
Learn more about chain swaps ??https://t.co/abfgnELSvi
— Tether (@Tether_to) November 18, 2022
A chain swap is a process that moves crypto assets from one blockchain to another. According to Tether, chain swaps may be requested by an exchange if they have a surplus of funds on one blockchain but a deficit on another.
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