Is Tether operating as a fractional reserve bank?

[UPDATED AT BOTTOM OF ARTICLE WITH RESPONSE FROM TETHER]

So-called stablecoin Tether has been diversifying its dollar reserves like a traditional bank, according to a beguiling update on its official website (credit to redditor AtlasRand1, the alter-ego of legendary Tether-skeptic BitFinex’ed). This is less than ideal because it is not  a traditional bank—it is a fragile, high risk cryptocurrency ecosystem whose very functioning depends on one basic principle: the IOU.

We call Tether an IOU stablecoin because it (supposedly) derives its dollar-peg from the assurance that each tether is backed by a fully redeemable dollar—i.e. a debt. Yet the following quote raises questions over how well-equipped Tether is to repay that debt:

“Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables

... read more at: https://decryptmedia.com/5888/tether-stablecoin-fractional-reserve-bank-dollar

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