Now, it’s tether taking a hit. The world's largest stablecoin has seen investors pull out $7 billion amid the ongoing crypto crash.
The market circulation of tether, also known as USDT, has dropped from about $83 billion on May 11 to around $76 billion on Tuesday, according to CoinMarketCap. The decline coincided with the crash of another major stablecoin, UST, and its sister cryptocurrency luna.
But Tether Operations Limited, the company behind USDT that has close ties to the Bitfinex crypto exchange, stressed that the withdrawals did not signal a "run on the bank" scenario, as observers including Treasury Secretary Janet Yellen characterized the UST collapse.
“Since May 11, Tether successfully processed $7 billion of USDT redemptions for verified individuals,” the Tether company said in a blog post. “Every redemption request which was submitted was redeemed in full.” The company said it has sought to ensure that “it always has at hand a liquid portfolio of assets to manage redemptions, even in a bank-run scenario.”
Unlike UST, which relied on algorithms to dynamically maintain its one-to-one peg to the U.S. dollar, the tether coin is backed by cash and other equivalent assets.
Tether has faced allegations of not having sufficient cash reserves to back the stablecoin. Last year, Tether and Bitfinex agreed to pay an $18.5 million fine to settle a New York state attorney general probe which accused the two companies of a “cover-up to hide the apparent loss of $850 million of commingled client and corporate funds.”
USDT has maintained its value at $1, though the stablecoin briefly slipped near 99 cents on Monday. Tether said it “has never failed to process a redemption request for USDT at a value of $1” for every tether coin.