• Wed. Dec 6th, 2023

Tether Falls Victim to Higher Levels of Regulation and Scrutiny

Oct 9, 2021

It looks like the crypto platform tether is getting some backlash from regulating authorities. The regulation officers had only recently started the task of understanding the digital currency. This meant going over the organizational structure and the cash reserves.

The cryptocurrency has 48 billion Tethers, all of which have a valuation of a single dollar. When they started out, the company said it had a dollar to match each token, but now, things are unclear. Regulators are trying to find out if they still have the financial resources to offer that insurance. They are also trying to determine if the crypto has a plan of action in case all stablecoin holders decided to cash their investments on the same day.

In July, the Treasury Secretary collaborated with other top officials so they can look at the issue. The team met with top officials like the head of the DEC and the Federal Reserve Chairman. This was done so they could protect the US financial system before Tether could negatively affect it.

Tether works by the company Tether Holdings taking money from users and crediting their digital wallets with Tether. Then, these holders can use their Tether holdings by sending them to crypto exchanges. Or, they can use them to purchase other cryptocurrencies, like Dogecoin, Ethereum, and Bitcoin.

Bloomberg recently came out with a report on this entire Tether fiasco, which explains how Tether’s claims have always been a mystery. It’s been years since critics have argued that Tether Holdings lacks the financial resources to keep up the charade.

In this case, it refers to the idea of a 1-for-1 exchange rate. As a result, the coin becomes a fraud because there is no real value backing the digital token. There would be complete and utter chaos if users decided to cash in their Tether around the same time. That’s because the company doesn’t have the money to pay all of them.

If we were to calculate the combined value of Tether, we’d have more than just the 48 billion Tethers that were issued this year. We’d also have to add the number of coins that are currently in circulation. Collectively, that’s an enormous value of $69 billion. Because of this, the tether is technically among the 50 major banks to ever exist.

While the concept of stable coins has been shady at best, it’s likely that this case will serve as an example for upcoming cryptocurrencies. Regulators are now bound to come up with a plan to manage these shifty tokens.

In July, the country’s justice department looked into whether the company’s executives covered up the actual nature of transactions. They are also trying to determine if the company’s banking partners knew about the transactions being connected to crypto.

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