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Ethereum Co-Founder Defends Tether Against Bitcoin Price Manipulation Claims

Last Updated March 4, 2021 3:36 PM
Josiah Wilmoth
Last Updated March 4, 2021 3:36 PM

One of the cryptocurrency community’s most respected voices is throwing his support behind tether (USDT), the controversial “stablecoin” that critics allege has been used to manipulate the bitcoin price.

Joseph Lubin, an Ethereum co-founder, told Yahoo Finance  that he “believes” USDT is backed by physical dollars at a 1 to 1 ratio, as the token’s issuer — the eponymous cryptocurrency startup Tether — claims.

“Tether’s an interesting project,” Lubin said during an interview on Tuesday. “Based on our analysis, which involves just talking to a bunch of people in the space, we do believe that tethers are backed 1-to-1 by U.S. dollars in bank accounts… With respect to market manipulations, I’m not sure that market manipulations are related to Tether directly, if they do exist.”

Those claims of market manipulation, as CCN.com has reported, have come from a variety of critics. In a study published earlier this year, researchers at the University of Texas argued that correlations between bitcoin price movements and tether issuance suggested that Tether — along with Bitfinex, with whom it is closely associated — was operating a fractional reserve and using unbacked tokens to inflate the bitcoin price.

Tether’s market cap has ballooned in 2018. | Source: CoinMarketCap

Tether has yet to release an independent audit refuting this claim, but the firm did hire a U.S. law firm founded by a former FBI director to investigate its finances. The firm’s report found that, as of June 1, Tether was holding more than enough USD to cover its outstanding tokens.

Lubin, who now runs ConsenSys, an Ethereum development studio with more than 1,100 employees, said that if there is manipulation in the cryptocurrency market, it stems from the fact that trading platforms are relatively-unregulated compared to conventional securities exchanges.

“Ideally we’ll get a little better regulation of those centralized exchanges, at least, and we’ll see less sloshing around in price.”

However, Lubin said that he expects other, more decentralized tokens to ultimately supplant tether to become the top cryptocurrency stablecoin.

Featured Image from Collision Conference/Flickr