To appreciate why Tether has such outsized importance, it’s essential to understand how it fits into the overall world of cryptocurrencies. The blockchain’s design makes it easy for traders to move cryptocurrency of any stripe between exchanges without having to disclose their identities. While terrorists and other criminals love this feature, governments and regulators do not, so they enacted rules to improve transparency. That push essentially created two crypto marketplaces: one that follows the law, and one known for a more fast-and-loose approach.

The first type, “banked” exchanges, have relationships with traditional finance sources. One example is Coinbase, an outfit located in San Francisco that lets U.S. residents buy bitcoin and other popular digital tokens with credit cards and redeem them for government-backed currencies such as the U.S. dollar and the euro. To meet federal “know your customer” regulations, Coinbase demands that clients verify their identity by uploading government-issued ID.

“If you want to convert from bitcoin back to U.S. dollars, you have to touch the traditional financial system,” says Tyler Moore.

Unbanked exchanges ask fewer questions about who their users are, so most banks refuse to work with them. Binance, a Malta-based exchange, lets customers trade 380 currencies, but only for other crypto. If you want to cash out, you have to transfer your coin to something that a banked exchange is willing to work with — bitcoin, Ethereum’s ether, and Litecoin are three of the most popular — and sell it there.

“If you want to convert from bitcoin back to U.S. dollars, you have to touch the traditional financial system,” says Tyler Moore, a professor of cybersecurity at the University of Tulsa who has studied cryptocurrency fraud. That sets up a tension between the desire for hard assets, which require oversight and accounting, and the unfettered freedom found on unregulated, unbanked exchanges. “These exchanges are black boxes,” Moore adds. “It’s safe to say that these markets are not fully understood.” Allegations of wash trading, spoofing, and other forms of illegal market manipulation abound.

Tether was established in 2014 as a link between the wild world of cryptocurrency and the more buttoned-up world of fiat money. It was designed such that, like fiat currency, its value would be stable, but like crypto, Tether could whizz unfettered through the murkier corners of the global economic system. If you’re trading on some sketchy exchange in Kazakhstan and want to park your profits in something stable for a while, you can purchase Tether. You can then turn that Tether seamlessly into a different crypto asset, slide it over to a banked exchange, and cash it out there.

What you don’t want to do with Tether is hold onto it as an investment. Unlike every other cryptocurrency, Tether has no hope of suddenly exploding in value. It’s engineered explicitly not to provide any kind of a return. For instance, if you bought $2,500 worth of Tether a year ago, you’d have $2,500 today; if you put the same money into Bitcoin, you’d have ridden it up to $18,000 — and hopefully sold at the height before tumbling back down to the current price, which would still be more than double what you started with.

The quantity of Tether started to grow in early 2016, and by the end of that May, the market cap had risen to $2 million; by July, it stood at $7 million.

For that reason, it’s not clear why Tether Limited, Bitfinex, or their investors would want to mint Tether in the first place. Unlike users on the secondary markets who can easily zip between Tether and other crypto, someone who wants to create new Tether is supposed to do so by laying down a block of cash that will serve as the new coins’ reserve. This reserve then sits in a bank account earning nothing, not even savings account interest. Sure, they can use the Tether they’ve been granted in return to invest in other cryptocurrency, but you don’t need Tether for that.

For Sarit Markovich, a professor in the Strategy Department of the Kellogg School of Management at Northwestern who studies cryptocurrency, the motive for minting Tether is unclear. “I don’t understand the business model,” she says.

Nevertheless, Tether has grown wildly. For the first year or so after its debut in 2014, it was a fairly small-scale venture that operated largely under the radar, with less than $1 million worth of coins in circulation. The quantity of Tether started to grow in early 2016, and by the end of that May, the market cap had risen to $2 million; by July, it stood at $7 million. After a six-month pause, it started climbing again in early 2017, hitting $25 million on February 1 and double that in April.

Then came trouble. That month, Wells Fargo ended its relationship with Tether, and the company issued a statement on April 22 declaring that “all incoming international wires to Tether have been blocked…As such, we do not expect the supply of tethers to increase substantially until these constraints have been lifted.” Despite this change in its business plan, the value of coins in circulation continued to expand exponentially, from $50 million in April to $440 million in September. Today it stands at more than $3 billion.

No one outside Tether knows whether this growth is attributable to investors pumping cash into the currency or if the company has simply summoned money out of thin air. Cybersecurity analyst Tony Arcieri believes it’s the latter, writing that “Tether is being used to effectively counterfeit hundreds of millions of dollars of perceived value.”

Tether replied to the allegation in an email to Medium: “We can confirm that Tether is fully backed by USD reserves,” a spokesperson wrote. On June 20, it released a report it had commissioned from the Washington, D.C.–based law firm of Freeh, Sporkin & Sullivan (FSS) attesting that “Tether’s unencumbered assets exceed the balance of fully-backed USD Tethers in circulation as of June 1st, 2018.” The report included important caveats, however, stating that “FSS makes no representation regarding the sufficiency of the information provided to FSS,” and “FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles.”

Let’s assume, though, that Tether really does have $2.7 billion sitting in a safe somewhere. Where did it all come from?

This kind of language raises questions. The white paper that heralded Tether’s creation explicitly calls for regular audits. Without them, anyone buying Tether is effectively operating on faith. Think about it: You can barely rent an apartment without going through a credit check and proving you can cover the cost. You’d think the market would demand some concrete assurances about the issuance of $2.7 billion worth of currency.

Let’s assume, though, that Tether really does have $2.7 billion sitting in a safe somewhere. Where did it all come from? The most innocent answer is that some deep-pocketed investors decided they wanted to invest in cryptocurrency, but rather than simply buy some with dollars, they instead opted to buy Tether first and then use that to purchase the crypto.

Just why anyone would do that remains unclear, especially since, as UC Berkeley computer science researcher Nicholas Weaver has pointed out on Lawfareblog.com, “[O]ne has to believe that they did this even though these unregulated exchanges have a history of getting hacked, with customers losing their investments.”

A less innocent answer is that the investors couldn’t go to a banked exchange because their funds came from illegal activity, so they used Tether to turn their ill-gotten gains into untraceable crypto loot. In other words, money laundering.

Perhaps the most troubling answer for crypto investors is that Tether minted currency out of thin air, used it to buy other cryptocurrency, sold that cryptocurrency, and used the proceeds to create its reserves. That is, assuming the reserves actually exist at all.

In a sense, though, it doesn’t matter whether the money is in the bank or not. Tether’s terms of service state, “We do not guarantee any right of redemption or exchange of tethers by us for money.” Even if the money is in the vault, Tether holders have no claim to it.

So, what is Tether worth? In the early days after its introduction, the answer was obvious: The coin was worth a dollar, because the two were interchangeable at will. Since that’s no longer the case, one might expect Tether’s value to float, much as the Argentine peso did after it was decoupled from the U.S. dollar in 2001. It hasn’t. Even when several hundred million new tokens hit the market, as happens fairly often these days, Tether’s price stays locked to the dollar.