Why Crypto Traders Are So Worried About Tether

It’s one of the most hotly debated questions in the world of virtual currencies: Is Tether telling the truth when it says that each of its digital coins is backed by one U.S. dollar? The answer could have big ramifications, given that Tether’s coin (also called Tether or USDT) is among the most actively traded cryptocurrencies -- treated by many as a substitute for the greenback on crypto markets around the world. But the coin has been under investigation by the U.S Justice Department over possible trading manipulation. In April, New York’s top cop accused the firms behind USDT of covering up an “apparent loss” of $850 million of co-mingled client and corporate funds.

It’s an issuer of a cryptocurrency with a twist. Unlike Bitcoin, whose value fluctuates wildly from day to day, Tether’s tokens are designed for stability. Prices for the coins have historically stayed near $1 because Tether says each one is backed by a dollar in its bank accounts.