Earlier this week, Tether (  USDT  ) made headlines to   freak out XRP   and take third place for the largest cryptocurrency by market capitalization.

Confidence in main stablecoin appears to have returned, although Tether and Bitfinex are still involved in two pending legal proceedings - one of which relates to an $ 850 million cash loan made by Tether to Bitfinex, secured by Bitfinex actions .

Investors didn't like the fact that their Tether was no longer individually backed by dollars. But with US banks now allowed to issue loans without reservation, were stocks actually a better option?

Tether backed by money (and Bitfinex stocks)

In April 2019, the New York Attorney General's Office announced an ongoing investigation into Tether and Bitfinex.

It has been alleged that Tether granted Bitfinex a $ 850 million cash loan to plug a hole in its finances. In return, Bitfinex built up its own stock as collateral for the loan.

This case is still ongoing and, in the meantime, Bitfinex has repaid the loan in several installments.

But at the time, investors were in turmoil after finally confirming the rumored lack of one-for-one-dollar Tether support for cash reserves.

Cash backed by nothing

But legislation approved by the US Federal Reserve in March now allows banks to issue loans with a zero reserve rate.

This is perhaps the most extreme version of fractional reserve banking, whereby banks must at least hold money in reserve against the funds they lend. Which means it's not just the Fed itself that prints an endless amount of money. Banks are also getting into action.

So, with an infinite amount of dollars backed by nothing that is not available, is it possible that the Bitfinex stock turns out to be the strongest asset?

With the Attorney General's case and a class action claiming that market manipulation is still going on for Tether and Bitfinex, it's probably a bit early to say.