The cryptocurrency market faces potential turbulence as the US government reportedly investigates Tether, the world’s largest stablecoin issuer. This news comes from Ripple CEO Brad Garlinghouse, who predicts another significant black swan event could disrupt the crypto space, similar to the FTX collapse.
Garlinghouse’s comments raise concerns about Tether’s stability and potential negative impacts on the broader market. His claim is based on the testimony of Adwale Adeyemo, US Treasury Deputy Secretary, before the Senate Banking Committee, pointing out Russia’s reliance on USDT to evade US sanctions. Further to this, recent reports suggest Tether’s USDT stablecoin the terrorist organizations.
Tether Holdings, the company responsible for USDT, has encountered various legal and regulatory challenges. Previous allegations involve concealing crypto-linked funds from banks and a lack of transparency regarding the reserves backing USDT. In October 2021, the Commodity Futures Trading Commission imposed a $41 million fine for misleading customers by claiming to hold sufficient reserves for USDT but covering only 27% of the days between 1 June 2016 to 25 Feb 2019.
Despite these facts, Garlinghouse commented on Tether’s issues just a few weeks ahead of launching its own US dollar-backed stablecoin in 2024. This stablecoin will be backed by dollar deposits, short-term government bonds, and other cash equivalents. The timing of Ripple’s announcement, amidst Tether’s difficulties, has sparked speculation about its competitive intentions. However, Tether maintains its commitment to working with law enforcement and adhering to regulations.
Tensions escalated after Garlinghouse’s statements. Tether’s CTO, Paolo Ardoino, questioned the credibility of Garlinghouse’s claims, hinting they could be motivated by Ripple’s ongoing SEC investigations. Ardoino strongly defended USDT, highlighting its widespread adoption, price stability backed by liquidity reserve, and robust compliance efforts. He emphasized USDT’s role in facilitating financial transactions in developing economies.
Adding to the debate, Ardoino provided updated information on Tether’s global compliance measures and operational standards. This move can be seen as an attempt to counter concerns about the company’s transparency.
The coming months will be crucial for both Tether and the broader crypto market. The US government’s investigation and potential regulatory actions toward Tether pose significant uncertainties. As the situation unfolds, all eyes will be on how Tether navigates these challenges and how Ripple positions its stablecoin offering in the market.
Adding to the complexity, the participation of two significant players in the industry, each with their interests, adds another level of interest. The development of their rivalry and its impact on future regulations will be a story to watch closely.
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