Tether, the company behind a dollar-pegged stablecoin, has revealed on Wednesday, in a Twitter post, that it has burned 500 million Tether (USDT) tokens.
Before they were destroyed, said tokens are kept in an account called “Tether treasury.” The “Treasury” has been flooded with a huge inflow of USDT the recent weeks, most especially after the stablecoin lost its parity with U.S. dollar last week in the midst of questions regarding Tether’s access to banking services.
680 million USDT had been transferred to the company-controlled Treasury wallet starting October 14 (the time when the USDT started to tank below the $1 mark) up to October 23. The transfers originated from an address managed by crypto exchange Bitfinex, which shares the same owners and management as Tether.
Since early September, Bitfinex’s cold wallet’s balance had dropped by roughly 100,000 Bitcoin. This led to speculations that the crypto exchange had been using Bitcoin to be able to take Tether off the market, probably in an attempt to bring the exchange rate back to the $1.00 level or even to leave its stablecoin endeavor altogether.
The transfers had resulted in the decline of Tether supply in circulation by about a quarter to roughly $2 billion in more than a week. At present, aside from being taken out of circulation, the company has “burned” the majority of these tokens have been.
Bitfinex director of communications Kasper Rasmussen states that the move “does not have anything to do with defending dollar parity,” considering the fact that the exchange and Tether guarantee 1-for-1 redemptions. He also belies reports that Tether is deliberately scaling back supply.
Rasmussen also claims that Tether tokens are redeemed when the supply in circulation surpasses the amount required for either Bitfinex or Tether to operate. Bitfinex being one of Tether’s major customers is the reason the majority of the burned tokens came from Bitfinex.
Through the announcement, Tether says that it has not destroyed all of the USDT kept in the Treasury account. The company adds that about 466 million USDT remained in the account in preparation for future USDT issuances.
The announcement has described the USDT transfers to the Treasury as “redemption,” a procedure which has been previously explained in its original white paper.
The whitepaper, which was released in 2016, indicates that USDT holders may cash in their tokens for U.S. dollars directly with the firm. Tether assures that every USDT token is backed by a U.S. dollar deposit. However, it fails to convince skeptics that the crypto is indeed fully collateralized.
Meanwhile, “Bitfinex’ed,” an unidentified anti-Tether advocate, questions Tether’s description of transfers as “redemption,” by writing:
“Not one person can come forward and say that they converted Tethers to dollars and got wired money from Tether.”
Rasmussen denies this claim, saying that Tether customers are able to redeem their USDT via Tether Ltd.
Despite this, many others claim that redeeming USDT for dollars with Tether is not possible.