Tether, the blockchain-powered platform that’s used to power the largest stablecoin by market cap, and Aave Protocol, an open-source and non-custodial money market protocol, have reported a significant increase in demand for Tether (USDT).
They claim that the surge in demand for USDT may be attributed to the growing interest in decentralized finance (DeFi) applications and platforms.
As noted in a release shared with CI, USDT remains the fastest growing stablecoin money market in the evolving DeFi space. There are currently around $7.2 million in USDT available via the Aave platform.
USDT aims to support various DeFi products on Aave, which now has a total liquidity of around $70 million with approximately $60 million of digital assets locked into smart contracts.
The release mentioned that there’s been “a ready take up of USDT in Flash Loans,” which allow users to borrow several different ERC-20 compliant tokens without having to put up collateral to back their loan positions. But this is on the condition that they pay back the loan amount with the same transaction.
As explained in the announcement:
”Flash Loans can be used to take advantage of on-chain arbitrage opportunities, compete for on-chain liquidations and move open positions between DeFi platforms. The products could even power High Frequency Trading strategies in crypto.”
The use of USDT on Aave has been powered by various lending solutions that could potentially support the development of an alternative financial ecosystem, the release stated.
It added that US-dollar pegged stablecoin provides depositors with a rate of 6.37% APY interest on their USDT holdings without giving up custody of their funds.
Stani Kulechov, CEO at Aave, claims:
“Our depositors receive the highest average yield on stablecoins with USDT… most protocol fees have been collected with USDT and part of them redistributed back to integrators who are building new DeFi products by taking advantage of the DeFi composability.”
Paolo Ardoino, CTO at Tether, says that USDT is “the reserve currency of crypto and DeFi.”
USDT’s market cap has grown over 4x from around $2 billion in February of last year to presently almost $9 billion. Tether works with Algorand, Ethereum, EOS, Liquid Network, Omni and Tron.
Tether and its sister company Bitfinex, a major digital asset exchange, were subpoenaed by the US Commodity Futures Trading Commission (CFTC) back in December 2017.
A document posted on Tether’s official website at that time revealed that it had about $443 million in its company bank accounts as of September 15, 2018.
At the time of the audit, which was performed by Friedman LLP, Tether’s USDT tokens in circulation had been valued at $420 million that day. However, Tether was not able to verify whether it actually held the $2.3 billion in deposits in order to fully back the USDT it had issued at that time.
Later on, Tether said that its USDT wasn’t fully backed by US dollar reserves. Instead, the stablecoin was about 70% backed with USD reserves and the remaining was backed by “cash equivalents,” the company had claimed.
Throughout the years, Tether and Bitfinex appear to have experienced significant problems with how they manage their business operations. They had been working with a digital currency payment processor called Crypto Capital which allegedly lost hundreds of millions of dollars worth of funds belonging to Bitfinex.
In October 2019, Oz Yosef, principal at Crypto Capital, was charged with three criminal counts by the US Attorney’s Office of the Southern District of New York.
Ivan Manuel Molina Lee, president at Crypto Capital, was also taken into police custody in Poland. He was charged with conspiracy to commit bank fraud, and for running an unauthorized money transmitting service.
Crypto Capital had allegedly been serving as Bitfinex’s payment processor, and reportedly managed to lose the exchange’s $850 million it was holding, a scandal that also involved Tether.
Stuart Hoegner, Bitfinex’s general counsel, had claimed that the exchange was a victim of fraud.
However, the NY Attorney General’s Office has alleged that Bitfinex inappropriately used Tether’s funds, in an attempt to cover up for the $850 million loss.