Is Tether really money?

In early 2017, when one of their correspondent banks, Wells Fargo, began refusing their incoming and outgoing wire transfers.

The controversy over Tether stems in large part from the “legal” section on their website. In that document, Tether asserts:

“Once you have Tethers, you can trade them, keep them, or use them to pay persons that will accept your Tethers. However, Tethers are not money and are not monetary instruments. They are also not stored value or currency. There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.”

An official statement released today, Tether pointed out:

“We are aware of online discussions about Tether’s lack of publicly-available audits. Periodic audits of our bank balances have been performed by the Taiwan-based auditing firm TOPSUN CPAs & Co. The results of those audits were for the benefit of shareholders and were not in a form suitable for public consumption (to begin with, they were in Mandarin). Nonetheless, we have asked them to prepare the following attestations (PDFs linked) in English, for release to the community, covering December 31, 2016; January 31,2017; February 28, 2017; and, March 31, 2017. As we are no longer banking in Taiwan, and given that we are achieving substantial scale, we have engaged Friedman, LLP, in New York, to perform comprehensive balance sheet audits on a quarterly basis going back to Dec 31, 2016. We will share those results with you as they become available in the coming weeks or months.”

With respect to their own claim that tether tokens are not money and are not guaranteed to be redeemed by the company, Tether writes:

“Our Terms of Service have been carefully picked apart by various malcontents and twisted to suggest that Tethers would not be redeemable for currency on some bizarre, malicious whim by Tether. That is untrue. While we reserve the right not to redeem for any particular customer, as we must, we will not do so for no reason. We have a duty to try to ensure that our service is not being used by persons from sanctioned countries, that is otherwise on a sanctions list, or that has some background check problem. In short, redemptions will not be unreasonably denied, but we reserve the right to selectively deny redemption and creation of Tethers on a case-by-case basis.”

Tether notes that it has enough intact banking relationships to service some, but not all, large customers:

“While our banking challenges are troublesome and distracting, tens of millions of dollars are able to flow in and out of Tether daily using the channels we have established.  Although not available to all users, these flows have been sufficient to bring markets supporting Tether-based trading pairs back into alignment with markets supporting USD-based trading pairs.”