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“Member’s Only” Bitfinex Accused of Foul Play

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“Member’s Only” Bitfinex Accused of Foul Play

The largest bitcoin exchange in the world, Bitfinex, has put itself in an awkward position after suddenly and inexplicably changing its new-members policy to invite-only. According to the exchange, this move was made with the intention of increasing web traffic to the site, yet it appears to have generated quite the opposite response.

Bewildered and angry customers largely fail to understand why they were excluded from being able to use Bitfinex’s platform, simply on account of their not already being members. Bitstamp has also pointed to a slowing of onboarding of new users, stating in a December 20 post, “We are currently expanding our capacity to onboard new customers but, given external events and the high workloads we are experiencing, this will take some time.”

Bitfinex has also been in the spotlight recently for other reasons far from positive to the exchange. For one, many have long suspected a suspiciously-close link between the exchange and Tether, a cryptocurrency whose claim to fame is its stability. Indeed, the price of Tether has remained close to $1 for the majority of the time since its launch in 2015, providing retailers with all the benefits of cryptocurrency payments without the volatility in price fluctuations.

Tether claims its store of value is supported by a peg to $1 representing each unit of the cryptocurrency. This has led to large suspicion of the cryptocurrency, as many believe that there is no $1.2 billion stored, in any one bank or number of banks, to back up these Tethers.

“There’s a fear going on that the recent price rise was helped by printing of USDT (Tether) that is not backed by USD in a bank account,” said Litecoin creator, Charlie Lee.

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Additionally, the Tether support staff is disinclined to name the banks that it partnered. Now, people want to know exactly how Tether and bitcoin are linked, and why this alliance has not been publicly disclosed.

When it comes to cryptocurrencies, investors seldom know all the details about the latest digital currency that they have bought. These digital assets are largely speculative in value, which could change at any time. As a result, investors place a large amount of trust in the digital assets that they are investing money in. Where Tether is concerned, much of this trust has been lost, with the change only likely to be regained when the supposed $1.2 billion is produced and verified.

Yet what is the connection between Tether and Bitfinex?

Before Bitfinex publicly announced its decision not to work with US-based investors due to the regulatory environment, Wells Fargo & Co. openly ended its partnership with the exchange. Wells Fargo & Co. previously acted as the correspondent bank for US to Taiwan money remittances through Bitfinex and Tether. Initially filing a lawsuit against Wells Fargo and Co., the case was later withdrawn.

When questioned on the replacement correspondent bank, Tether refused to name the successors without having the interviewer sign a non-disclosure agreement.

The following statement appears to have been an attempt to mitigate the situation:

“While we have some clear challenges, please note that tens of millions of dollars continue to flow in and out of Bitfinex daily. Although not available to everyone, these fiat flows have been sufficient to keep our market in alignment with other exchanges as we continue to gain market share.”

With all of the above taken into consideration, Bitfinex’ rumors are nothing new to the cryptocurrency market. All trends and suspicions should always be thoroughly researched before they are acted upon.

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