Tether, the celebrity of the stablecoin world and one of the most ‘traded’ ‘cryptocurrencies’ in the world. I say this in inverted commas, as it’s status is a little hard to grasp, this aside, Tether has made a name for itself and is now as viable an asset as the US Dollar, and the range of other FIAT currencies that is is tied up too.
The Wall Street Journal have recently published a very in depth report into the status of Tether, a report that Cryptoglobe have dissected to explore Tethers role as a ‘central bank’ for cryptocurrency.
The full Wall Street Journal (WSJ) report can be found, here.
Cryptoglobe’s dissection can be found, here.
Is Tether a central bank?
As mentioned, Tether is a stable coin, one that is tied to the value of FIAT currency. Generally, the majority of Tether tokens are tied to the US Dollar, however there are some instances of Tether-Euro tokens, and the network is soon to see the introduction of a Tether for Japanese Yen.
One advantage of Tether then, is that it can provide a platform for crypto companies that need access to a stable banking format, but still need to be able to deal in cryptocurrency as opposed to FIAT. According to Cryptoglobe, the WSJ report states:
“Tether has also become a crypto bank for cryptocurrency businesses that have trouble maintaining real-world banking relationships, providing liquidity and a place to park assets, according to a new study from blockchain research firm Chainalysis.”
Not only does Tether exist as a banking option for crypto companies, it also maintains a structure that could be considered, bank-like. According to Cryptoglobe, the WSJ report states:
“In June, Tether hired law firm Freeh Sporkin & Sullivan LLP, co-founded by former Federal Bureau of Investigation Director Louis J. Freeh, which issued a report stating that it believed tether had full dollar backing.”
“Tether has become a key source of liquidity. At times this summer, tether has represented as much as 80% of bitcoin trading volume, according to research site CryptoCompare. When the year began, it accounted for about 10% of bitcoin trading volume.”
Of course, Tether isn’t a totally viable cryptocurrency banking solution, it does however offer some of the advantages of a central bank, in a hybrid FIAT and crypto field. I suppose we could well see this as a model for the future of Central Bank Digital Currencies, something that the likes of the Bank of England and the Reserve Bank of India have very recently been associated with.