Heavy fine for Tether (USDT) and Bitfinex
Since early 2021, Tether has been under investigation for lying about its US dollar reserves. For several years, Tether has indeed claimed that each USDT stablecoin is backed by a dollar. So, if 100 million USDT is in circulation, Tether should logically have 100 million USD as collateral.
Nonetheless, according to the Commodity Futures Trading Commission (CFTC), the US regulator of derivatives markets, this statement by Tether was false or, at least, exaggerated. For this reason, the CFTC has decided to impose a fine of $ 41 million and $ 1.5 million respectively against Tether and Bitfinex.
The Bitfinex exchange platform is sanctioned for its affiliation with Tether and the partnerships formed between the two companies. The USDT token was indeed launched on Bitfinex and the Panama Papers revealed that, through a game of offshore companies, Tether and Bitfinex were in fact sister companies.
👉 More info on the Tether project (USDT)
Tether (USDT) accused of lying about its reservations
What exactly is Tether accused of? The CFTC criticizes the USDT issuing company for deceiving its users and customers, including exchange platforms, about the guarantee of its stablecoin.
However, the CFTC investigation affirms that this is not the case, quite the contrary. The authority specifies that, over a 26-month period between 2016 and 2018, the USDT was only fully guaranteed by the US dollar 27% of the time. It is therefore far from the 100% asserted by Tether.
In a statement, Tether does not explicitly challenge the fine. Above all, she insists that no violations have been found since December 2018 and that the issues were resolved in a Terms & Conditions update in February 2019.
In other words, the company implicitly acknowledges that it was not on the ropes before that date.
This is not the first time that Tether and Bitfinex have faced justice. Earlier this year, an agreement was reached with New York State to cover a financial loss of $ 850 million.
👉 To read – Bitfinex and Tether (USDT) reach agreement with New York State and pay $ 18.5 million fine
Tether (USDT) tries to redeem itself and faces competition from USD Coin (USDC)
Tether’s court cases have not been a good publicity for its USDT stablecoin. In recent months, the company has wanted to be more transparent than in the past. First, through a report, she demonstrated how all of the USDT tokens were backed by the US dollar.
As if that proof wasn’t enough, the company eventually agreed to audit its stablecoin. This is a response to its competitor, the USDC stablecoin. The issuer of the latter, Circle, has indeed paid the services of the audit firm Gran Thornton to prove the way in which its cryptocurrency is guaranteed.
A recent study by Messari finally estimates that the USDT will supplant the USDT in the near future, to become the dominant stablecoin on Ethereum. Something to worry about Tether, who must probably hope that its transparency will allow it to keep the leadership in this juicy stablecoins market.
👉 Also read – Bitstamp will list a euro-backed stablecoin: Tether’s EURt
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About the author: Benjamin Allouch
Formerly a lawyer specializing in personal data and digital law, I quickly became interested in Bitcoin, blockchain technology and their legal implications. I am now an independent consultant and writer in the field of cryptocurrencies and blockchain.
All articles by Benjamin Allouch.