Stablecoin issuer Tether is swapping $1 billion worth of its USDT tokens from Solana to Ethereum. The move is in response to Solana’s exposure to collapsed crypto exchange FTX. Tether has confirmed the process will not affect the total supply of USDT.
Tether, the issuer of the world’s most traded cryptocurrency – USDT, has announced its decision to conduct a chain swap by transferring $1 billion USDT from Solana (SOL) to the Ethereum (ETH) blockchain. The company has said that its chain swap will reduce the amount of USDT circulating on Solana, but won’t affect the total amount of the stablecoin currently in supply.
The news comes following Solana’s exposure to Sam Bankman-Fried’s now-bankrupt crypto companies FTX and Alameda Research. FTX’s sister company and trading firm Alameda Research held $1.1 billion worth of SOL in its balance sheet. After its collapse there was fear that FTX would be dumping all tokens under custody. This led to Solana prices dropping across markets as panicked holders began selling the crypto asset. Solana, which was among the top five cryptocurrencies by market cap, is now ranked 16th after falling down by 25% in the last two weeks. Coincidentally, Bankman-Fried was a supporter and an investor in many Solana-based projects, including the blockchain’s primary decentralized exchange and DeFi liquidity provider, Serum.
Even though FTX’s crash affected the entire cryptocurrency market with Bitcoin and Ethereum falling to their lowest prices of the year, Solana was the hardest hit.
After the debacle of FTX, crypto exchanges Binance, Crypto.com and OKX suspended all deposits and withdrawals and delisted USDC and USDT stablecoins deployed on the Solana network. Binance however resumed all services for Solana shortly after.
On November 6th, FTX stopped all customer funds from leaving the exchange after facing liquidity constraints. Things then got heated after an alleged hack occurred on the exchange on November 12th. In a quick move, Solana developers cut all ties with Serum and took the project offline. Serum’s administrative private keys were apparently housed within SBF’s crypto platform. Solana Foundation, a non-profit organization that helps develop the Solana blockchain, revealed that it had $1 million in cash or equivalent assets stuck on FTX.
Sam Bankman-Fried and associates later admitted to mishandling over $2 billion in customer funds while his companies owed $8 billion in liabilities to more than a million creditors. FTX and sister company Alameda Research, which are registered in the Bahamas, have since filed for Chapter 11 bankruptcy at the Delaware bankruptcy court in the United States where FTX U.S is registered. The Securities Commission of the Bahamas has frozen all assets held by FTX and Alameda, and also appointed law firm Lennox Paton as the provisional liquidator for the companies. SBF has since stepped down from his position as CEO of FTX.
Solana Foundation has since put out a blog post explaining how the blockchain network is functioning as usual. The developers claim that the time taken by Solana to create a new block has increased to a rate of 0.61ms per block, while on-chain activity has increased by 180% than normal due to high demand in trading during market volatility.
Chain swap is the process of moving crypto assets from one blockchain to another supported blockchain. This usually happens when demand for crypto tokens rises on one blockchain and the project has to compensate for the demand by transferring assets from a blockchain with lesser activity. Tether previously conducted chain swaps in 2020 when it transferred $1 billion USDT tokens from Tron to Ethereum in the period of two months.
Stablecoins are most used crypto assets by investors. They aren’t volatile like Bitcoin or Ethereum as their value is pegged 1:1 to real world assets, like fiat currencies or gold. The native assets of DeFi platforms are used by crypto investors to buy and sell digital assets on the go without having to directly access fiat currencies. Tether is the world’s largest stablecoin issuer with tokens pegged to USD, Euro and Yen. The company’s crypto tokens are supported by multiple blockchains including Ethereum, Polygon, Tron and Solana.