Crypto ATM Operator Postpones USDT Support Over Fraud Allegations

CoinFlip, a cryptocurrency ATM operator, has recently revealed it postponed support for Tether’s USDT stablecoin over the New York Attorney General’s fraud allegations regarding Bitfinex and Tether.

According to the firm’s announcement, CoinFlip was set to support Tron’s version of the stablecoin, adding to 180 of its automated teller machines throughout the US, meaning users would be able to buy the token at convenience stores, gas stations, and tobacco shops in the country.

Speaking to CoinDesk Daniel Polotsky, the founder and CEO of the crypto ATM startup, revealed the plan to support Tron’s USDT was postponed over the NYAG’s case involving Tether and crypto exchange Bitfinex, which share management, as the firm wants to “make sure” they’re operating “100% lawfully before offering their products” to its customers..

As CryptoGlobe covered, Bitfinex was last month accused by the NYAG of having an $850 million hole since late 2018, which it reportedly covered by borrowing millions from Tether. The hole came as Crypto Capital, a third-party payments processor, claims they were seized by authorities from various governments.

To cover the situation, Bitfinex is said to have gotten a $625 million transfer from Tether between November and March, which it returned. It then got a $900 million line of credit from the firm, secured by iFinex shares. Per the NYAG, both Bitfinex and Tether are engaged in fraud.

Notably in March Tether quietly diluted its USD reserve claims, and as a result of Bitfinex being unable to access hundreds of millions, the over 2.6 billion USDT tokens in circulations are now only 74% backed by cash and equivalents. This saw the Bitfinex and Tether premium surge.

Given the situation, Tron also postponed a $20 million rewards program designed to encourage the adoption of USDT. The program would work with exchanges like OKEx and Huobi to airdrop Tron-based USDT tokens to users.

Its goal would be to encourage users to move tokens from the Omni protocol where the stablecoin was originally issued to Tron.

Most of Tether is Used on Centralized Exchanges for Arbitrage, Report

  • A new report by blockchain analytics firm Flipside Crypto claims the majority of Tether is used for arbitrage on centralized exchanges.
  • Flipside found that all Tether is filtered through Bitfinex before reaching the market and that no USDT has ever been destroyed. 

A new report by blockchain analytics firm Flipside Crypto claims that most of Tether’s use occurs on centralized exchanges for arbitrage. 

In a post published May 28, Flipside Crypto analyzed Tether’s on-chain activity to find that the majority of USDT is used for exchange-based arbitrage. Flipside compiled a visual chart of Tether’s on-chain activity, showing that all newly minted USDT is filtered through the cryptocurrency exchange Bitfinex before being released to the market. 

The report pointed out the overlap in parent companies between Tether and Bitfinex, which became a primary point of interest for the NY Attorney General’s Office in April 2019. Bitfinex was accused of using $850 million in funds from Tether to cover losses incurred by the sudden seizure of its now-defunct payment processor Crypto Capital.

The report continued, revealing that no USDT had ever been “burned” or removed from the total market supply.

Instead, Flipside argued that Tether’s primary use has been for arbitrage on centralized cryptocurrency exchanges. 

According to the report, 

It’s pretty clear that most of Tether is used on centralized exchanges, namely Huobi (in light grey), Binance (in yellow) and Bitfinex (in green). The constant movement back and forth between users (in red) and these exchanges reflects the fact that Tether is mostly used for arbitrage. Users can easily make a profit by buying from one exchange and selling on another for a higher price.

Flipside continued, explaining that traders are paying higher fees on Tether transactions to send USDT directly between personal wallets, as opposed to processing through exchanges, in order to create faster and more efficient arbitrage. 

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