- Consumers’ Research raised concerns about Tether’s lack of transparency regarding its U.S. dollar reserves.
- Tether has failed to deliver on its promise of a comprehensive audit since 2017.
- The company was penalized by the CFTC for making false statements about its dollar reserves.
In a report released on September 12, Consumers’ Research, a prominent U.S. consumer advocacy group, raised concerns about the stablecoin issuer Tether (USDT). The group called out Tether for its persistent lack of transparency regarding its U.S. dollar reserves, which the company claims back its stablecoin on a one-to-one basis.
Despite nearly a decade of promises, the company has yet to undergo a comprehensive audit to verify this claim. Stablecoins like USDT are designed to maintain a stable value, usually pegged to a fiat currency like the U.S. dollar, which gives them utility in the cryptocurrency market.
The report from Consumers’ Research emphasizes that without independent verification of its reserves, Tether poses a significant risk to consumers. The report highlighted that the company has been promising an audit since 2017 yet has failed to deliver one. In August 2022, Tether’s CEO suggested an audit was “months away,” but the audit remains elusive, casting further doubt on the company’s claims.
Tether’s Global Impact and Ties to Sanctioned Entities
The advocacy group points to multiple instances in which Tether has faced scrutiny from regulatory bodies. In 2018, the U.S. Department of Justice investigated whether the company and its sister company, Bitfinex, were involved in manipulating the cryptocurrency market.
Additionally, in 2019, the state of New York found that the company had moved large sums of money to cover an $850 million loss, leading to an $18.5 million settlement in 2021. The Commodity Futures Trading Commission (CFTC) also penalized it for false statements about its dollar reserves.
Concerns extend beyond financial transparency. According to recent reports, the company continues to process transactions from crypto exchanges like BitPapa, which have been sanctioned for their involvement in aiding Russia’s war against Ukraine.
The Wall Street Journal recently underscored its role in enabling a “parallel economy” that could bypass U.S. law enforcement, further heightening alarm about the company’s global impact.
Consumers’ Research’s report parallels Tether’s situation with the high-profile collapses of FTX and Celsius, both of which cost investors billions. The group urged state authorities to scrutinize Tether’s operations closely and consider measures to protect consumers from potential financial harm, emphasizing that the company’s ongoing lack of transparency is a looming threat.
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