“It has a very questionable legal history, and to this day its actual reserves are still quite opaque and would consist essentially of unknown sources of commercial paper,” Carlton said. Tether Limited has also run into legal issues due to its relationship with Bitfinex. In 2019, the New York Attorney General sued both companies. It was claimed that in 2018, when $850 million was lost to Bitfinex`s fund, $700 million of Tether`s reserves were used to cover the loss. Although the companies did not admit any wrongdoing, the owner paid a fine of $18.5 million in 2021. Regarding the latest news from China, he noted that all USDT transactions in China are illegal. However, banning such transactions may be too difficult for regulators, the executive suggested. “There is no way to technically ban USDT payments in any country,” he said. The expert also believes that USDT and its main competitor USD Coin (USDC) are “not at all popular in China”. It`s hard to accept, but thanks for writing this article. I need to rethink my crypto trades as they are mostly in the USDDT pair.
Citing China`s blanket crypto ban, which was enforced in September 2021, the court pointed out that digital currencies such as USDT do not have the same legal status as legal tender. The court found that the plaintiff`s claim to receive salaries and bonuses in the form of RMB was fully in line with local laws and the court upheld this claim. Tether is called a stablecoin because it was originally designed to always be worth $1.00 and hold $1.00 in reserves for every Tether spent. [7] However, Tether Limited states that the holders of retaining ropes have no contractual rights, no other legal rights or guarantees that the retaining ropes will be exchanged or exchanged for dollars. [4] On April 30, 2019, Tether Limited`s lawyer stated that each Tether was only covered by $0.74 in cash and cash equivalents. [8] [9] In summary, Tether Limited claims that all USDT is 100% guaranteed by the company`s reserves. These reserves are a mix of assets, so it`s not just money. It should also be noted that there is no legal guarantee that a USDT token can be exchanged for $1.
The lawsuit against Tether is likely the beginning of a push for consumer protection and stablecoin transparency, said Charley Cooper, a former CFTC chief operating officer who is now chief executive of blockchain company R3. “We anticipate that due to the potential systemic nature of certain stablecoins, regulatory oversight is likely in the near future.” Rather, the company`s reserves depended on “unregulated companies and certain third parties to hold funds that make up the reserves,” the government said, sharing reserves with Bitfinex, a cryptocurrency exchange with an indefinite relationship with Tether. (At the same time, the CFTC fined Bitfinex $1.5 million for “illegal over-the-counter retail transactions.”) Tether and TerraUSD (UST) are both stablecoins pegged to the US dollar, but both cryptos retain their value using completely different methods. In April 2019, New York Attorney General Letitia James filed a lawsuit accusing Bitfinex of using Tether`s reserves to cover up an $850 million loss. Bitfinex was unable to maintain a normal banking relationship, according to the lawsuit, so it deposited more than $1 billion with a Panamanian payment processor called Crypto Capital Corp. The funds were reportedly a mix of corporate and client deposits, and no contract was ever signed with Crypto Capital. [26] James claimed that Bitfinex and Tether knew or suspected in 2018 that Crypto Capital had fled with the money, but that their investors had never been informed of the loss. [26] Tether runs on Ethereum and has been linked to the overloading of the Ethereum network.
[28] In November 2017, approximately $31 million worth of USDT tokens were stolen from Tether. [39] A subsequent analysis of the distributed Bitcoin ledger showed a strong link between the Tether hack and the January 2015 Bitstamp hack. In response to the theft, Tether suspended its operations and said it would introduce new software to implement an emergency “hard fork” to recover all tokens that Tether identified as stolen during the theft to make it unexchangeable. Tether said that as of December 19, 2017, it has reactivated limited cryptocurrency wallet services and started processing the backlog of pending transactions. [ref. needed] Although USDT is Tether`s largest crypto token, it also has tokens pegged to the euro, yuan, and gold. I think the ideas Sergey was referring to are: 1- USDT is a scam 2- Governments will (not yet) use something similar to USDT to scam us.