Tether is a cryptocurrency that claims to be backed by the US Dollar and the Euro. In order for this to be accurate, they would need to hold equivalent numbers of both fiat currencies, in case there happened to be a run on Tether in just one of them. If this is false, however, they are essentially creating USD with every Tether. In January, 2018, the company added 850 million coins to their supply. According to their website, Tether states that you can view their balances at any time. However, there hasn't been an official audit since September 2017. The accounting firm Friedman LLP, has recently cut ties with Tether, prompting questions over the viability of the altcoin.
On December 6, 2017, the US Commodity Futures Trading Commission (CFTC) issued subpoenas to Tether and a partner exchange, Bitfinex. Should an investigation provide evidence that Tether does not have the USD to back their token, it is possible for them to face charges of counterfeiting the US dollar.
Bitfinex, the 4th largest trading exchange for cryptocurrencies, shares five of its senior management staff with Tether.
The ties between the exchange and coin have always raised some eyebrows. In 2017, Bitfinex halted trading for all US residents accounts. The regulations surrounding the trading of securities in America is rather strict, and all 50 states have individual laws regarding financial transactions. Neither Bitfinex nor Tether are American companies, making the process for verifying US participants even more difficult. Still, the association between Tether and the dollar, puts them into US jurisdiction.
The 2.5 billion supply of Tether, and its equivalent market capitalization, make up only a small portion of the financial impact they could have on the global crypto market. The purchase of Tether has displaced purchase of other altcoins, and with the high volatility of the markets, this displacement might actually be in the 10's of billions of dollars toward the overall market cap. This is known in economic terms as “opportunity cost.”
It is not impossible to tell how much USD has been exchanged for an asset, though it would take quite a while to track down each transaction for 2.5 billion blocks. With the subpoenas being more than a month old, however, and with no word from the CFTC, all the major press coverage is simple speculation.
