- Lack of Independent Audit Raises Concerns
- Questionable Practices and Comparisons to FTX
- SEC and JPMorgan’s Concerns
Consumers’ Research has raised serious concerns about Tether's transparency and the lack of independent audits for the reserves backing the stablecoin USDT.
Lack of Independent Audit Raises Concerns
Tether, the issuer behind the world’s largest stablecoin USDT, has long claimed that its tokens are fully backed by reserves, predominantly in U.S. dollars. However, according to Consumers’ Research, Tether has yet to provide an independent audit from a reputable accounting firm to verify these claims. The organization points out that the company has only released 'attestations,' which are less thorough than full audits.
Questionable Practices and Comparisons to FTX
The report compares Tether’s situation to the now-defunct FTX and Alameda Research, both of which collapsed due to poor financial controls and lack of transparency. Consumers’ Research believes that similar risks exist with Tether, especially given its alleged involvement with questionable entities and its use of USDT to circumvent international sanctions.
SEC and JPMorgan’s Concerns
The Wall Street Journal recently reported that Tether operates in a parallel economy outside U.S. law enforcement oversight. The report highlighted the potential dangers of such an unregulated ecosystem, noting that Tether’s operations could undermine efforts to combat illicit activities such as arms trading and sanctions evasion. Additionally, last February, JPMorgan Chase raised concerns about Tether’s compliance with regulations. The financial giant flagged the company’s lack of transparency as a potential threat to the overall stability of the crypto market, citing its dominance in stablecoin trading.
Tether has taken steps to improve its transparency. In January, Howard Lutnick, CEO of Cantor Fitzgerald, assured that Tether had sufficient reserves. Tether has also hired Philip Gradwell to produce reports offering more clarity to investors and regulators. The company has been active in combating illicit activity involving its stablecoin, assisting law enforcement agencies in recovering over $100 million in USDT tied to illegal activities since 2014.
