Tether’s Transparency and Trading Structure Raises $118B FTX-like Concerns

Tether's lack of third-party auditing has investors worried about the $118 billion stablecoin giant's FTX-like liquidity crisis.

Investor concerns are mounting around Tether, the world's largest stablecoin USD₮ (USDT) producer.

Justin Bones, founder of Cyber ​​Capital, has sparked the latest wave of concern, sharing his concerns that Tether could be a bigger scam than FTX.

Bones wrote in a September 14 X post:

“[Tether is] One of the biggest existential threats to crypto in general. They took 118 billion dollars as collateral without proof that we should believe it! Even after the CFTC fined Tether in 2021 for lying about their reserves.

In the year In 2021, the United States Commodities and Futures Trading Commission (CFTC) fined Tether $41 million for lying that USDT was fully backed by reserves.

Concerns about the stablecoin giant's influence on the crypto space grew louder recently after Tether's market share rose 20% over the past two years to 75% of the entire stablecoin market.

RELATED: Vitalik Buterin Sings At Token2049, Reveals Low L2 Fees As ETH Ranks

Unlike the FTX collapse, a hypothetical Tether implosion would be bank-driven.

One of the risks is the collapse of the FTX exchange, one of the industry's best-known black swan events, which resulted in the loss of approximately $8.9 billion in user funds.

FTX's failure to comply with $6 billion of wholesale customer withdrawals in three days, a hypothetical Tether implosion, is related to its banking partners, said Sean Lee, founder of IDA Financial.

Lee told Cointelegraph:

“Bear market or not, the possibility of Tether imploding is due to its structural ties to its underlying assets and bank rails, not so much market activity. Otherwise, USDT would have suffered during the last bear market, but instead it actually did.” [USD Coin] The USDC, which is down because of their reliance on Silicon Valley Bank and Signature Bank.

In May 2022, Tether successfully honored over $16.7 billion worth of USDT clients in 10 days.

By contrast, Washington Mutual Bank defaulted on $16.5 billion in 10 days, leading to what became known as the largest bank failure in the US in September 2008.

Others believe that Tether is too big to fail. In particular, Andy Lean, an author and governmental blockchain expert, does not expect Tether to face issues, but warned that large centralized entities in general could pose a threat to the cryptocurrency space.

“Cryptocurrencies were originally designed to operate without central control, promoting transparency, security and user autonomy. However, Tether, as a centralized stablecoin, has a significant impact on the crypto market due to its widespread use for trading and liquidity.

Cointelegraph has reached out to Tether for comment.

Related: Binance denies guilt in $230M WazirX hack, demands user payments

It raises concerns about Tether's business structure and transparency.

On September 8, Tether invested $100 million in Adecoagro, acquiring a 9.8% stake in the Latin American agriculture giant.

According to Cyber ​​Capital Bonus, this latest investment marks the first time Tether's governance structure has been revealed:

“The Tether Holdings Board has only 2 members; Giancarlo & Ludovicos. This means that the USDT stock is still not distributed in 2024 and these two have absolute control!”

Lee, founder of IDA Financial, was also concerned about Tether's lack of transparency. He wrote:

“Tether is structured like a business and they emphasize not providing a level of detail transparency that ensures real trust from the community and institutional players.”

While Tether boasted more than $118 billion in reserves in the second quarter, Cyber ​​Capital Bonds said it has yet to submit reserves to third-party audits.

“But an ‘Auditor's Report' or ‘Accounts Report' is not a formal audit at all! Despite its claims, Tether has not submitted its alleged reserves to a truly unrestricted third-party audit!”

Magazine: Bitcoin ETFs May Face Hacker Threat, Ellison Doesn't Want Jail Time & More: Hodler Digest, September 8 – 14