Bloomberg in a report on Monday, discloses an investigation by the U.S. authorities on the executives of Tether for committing bank fraud.
DOJ’s Investigation
Bloomberg reported on July 26th that there is an investigation by The Department of Justice (DOJ) into the stablecoin operator, Tether (USDT), regarding an incident relating to potential bank fraud from about a year ago. The DOJ has not confirmed any investigative probe.
Bloomberg attributed the news of the probe to three individuals with direct knowledge of the matter. The identity of these individuals are not revealed because of the confidential nature of the probe. Tether alleges that Bloomberg citing unnamed sources and raising years-old allegations was designed to generate clicks.
“Bloomberg published an article based on unnamed sources and years-old allegations, patently designed to generate clicks. This article follows a pattern of repackaging stale claims as ‘news.’” Tether responded to the Bloomberg article on the same day, refuting the alleged probe. “The continued efforts to discredit Tether will not change our determination to remain leaders in the community.”
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Tether plays a vital role as it is the most widely used stablecoin across decentralized finance. Most of the news related to the crypto market is for non-compliance and regulation.
A real criminal investigation would send shockwaves in the crypto market.
This is not Tether’s first brush with the authorities. Early this year, the Attorney General (AG) of New York settled a suit filed against the company and Bitfinex for $18.5 million. As part of the settlement, Tether and Bitfinex are no longer allowed to offer trading services to New Yorkers.
Tether’s Commitment to Transparency and Accountability
Tether affirmed its commitment to cooperate with law enforcement agencies, including the DOJ. The company attributed its growth to its technology and transparency.
However, this is contrary to the criticism leveled against Tether. In the press release in February 2021, Attorney General of New York, Letitia James, alleged that Tether’s allegation that its stablecoin is fully backed by U.S. dollars at all times was a lie.
“Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” said Attorney General James. “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie.”
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Although the DOJ allegations have been settled, the questions raised against Tether are disconcerting. Tether is the third most valuable cryptocurrency by market capitalization. With a circulation supply of $62 billion, more than half of all Bitcoin trades are paired with the stablecoin.
In a rare interview by CNBC with Tether’s Chief Technical Officer (CTO) and its general counsel in June this year, it ensured that the stablecoin is backed. Quarterly audits back this assurance. The company admits that the backing is not all in U.S. Dollars but includes cash equivalents such as secured loans, crypto assets, bonds, etc.
Tether cited that they are in open dialogue with government authorities in the U.S. and across the globe. This recent revelation of a continuing probe can have a massive impact on the global crypto market.
Transparency and Regulatory Oversight
There is a lot of trust placed on a company that alleges sufficient backing for its stablecoin. Any entity with the market size of USDT can destabilize the market if foul play is involved in Tether’s operation. Therefore frequent audits by independent parties to ensure the integrity of Tether’s function is not compromised.
Stablecoins, like the USDT, play a prominent role in bridging the traditional financial system to a public and decentralized platform. Tether is almost like a House of Cards holding up the crypto world. Strict regulatory framework is a healthy check and balance that keeps an eye on a centralized operation.
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DOJ, to date, has neither confirmed nor denied the news released by Bloomberg. Self-policing is inadequate as a control measure. A regulatory body must have its eyes on Tether’s ledgers to ensure that a stable coin is adequately backed.
Source : bsc.news
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