- Lack of Independent Audit Raises Concerns
- Questionable Practices and Comparisons to FTX
- SEC and JPMorgan’s Concerns Echo Transparency Worries
Consumers’ Research, a prominent consumer protection group, raised serious concerns over the stablecoin issuer Tether regarding its transparency and reserve backing of 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. Will Hild, executive director of Consumers’ Research, told Fox Business that Tether’s failure to deliver on years-long promises of a proper audit leaves consumers exposed to significant risk.
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. In its open letter to state governors, the group calls on policymakers to take immediate action to protect consumers from potential financial harm linked to Tether.
SEC and JPMorgan’s Concerns Echo Transparency Worries
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.
Despite the criticism and concerns, Tether has taken steps to improve its transparency. Recently, the company hired a former Chainalysis economist to produce reports on USDT usage and has been actively collaborating with law enforcement agencies to combat illicit activities.
