Tether is a cryptocurrency with tokens issued by Tether Limited, which in turn is controlled by the owners of Bitfinex. Tether is called a stablecoin because it was originally designed to always be worth $1.00, maintaining $1.00 in reserves for each tether issued.
While, according to its 2021 settlement with the New York Attorney General Letitia James, "Tether represents to users that any holder of tethers can redeem them from Tether the company at the rate of one tether for one U.S. dollar," Tether Limited as of 2017 stated that owners of tethers have no contractual right, other legal claims, or guarantee that tethers will or can be redeemed or exchanged for dollars. On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by $0.74 in cash and cash equivalents. In May 2021, Tether published a report showing that only 2.9% of Tether was backed by cash, with over 65% backed by commercial paper.
In February 2021, Tether settled their legal dispute with the New York Attorney General’s Office. Bitfinex and Tether did not admit any wrongdoing but paid an $18.5 million fine.