- Lack of Independent Audit Raises Concerns
- Questionable Practices and Comparisons to FTX
- SEC and JPMorgan’s Concerns
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.
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
The Wall Street Journal recently reported that Tether operates in a parallel economy outside U.S. law enforcement oversight, highlighting potential dangers of such an unregulated ecosystem. In February, JPMorgan Chase raised concerns about Tether’s compliance with regulations, noting that the company’s lack of transparency poses a threat to overall crypto market stability due to its dominance in stablecoin trading.
Tether has taken steps to improve its transparency. In January, Howard Lutnick, CEO of Cantor Fitzgerald, a firm managing Tether’s U.S. securities portfolio, assured that Tether had sufficient reserves. Additionally, Tether hired Philip Gradwell, a former economist at Chainalysis, to produce reports on USDT usage. Tether has also been active in combating illicit activity involving its stablecoin, collaborating with law enforcement agencies to recover USDT tied to illegal activities.
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