According to Davidson, the lack of transparency of Tether in recent years is more than enough for the SEC to monitor its behavior with more attention. It indicates that it is more important than the legal dispute it has with Ripple.
The US congressman for the Republican Party, who has already sided on several occasions in favor of Bitcoin in many of his public appearances, Warren Davidson, assured during an interview that stable coins like Tether currently pose a worrying financial risk.
Davidson’s statements arrived at the fore during an interview led by The Block team. The congressman highlighted his concern about currencies whose value runs in parallel with the US dollar; he also referred to the case of the controversial stablecoin Tether.
Davidson’s comments come amid a strong emphasis by regulatory entities on cryptocurrencies, which have specially mentioned Tether and other stablecoins as a priority.
These regulatory entities mentioned Tether as a priority because of the risks some private companies pose by issuing these cryptocurrencies. The value that can compete with the USD gets supported by the use of Blockchain that enables low-cost cross-border transactions without being watched by third parties.
Increasing Concerns about Tether
Concerns about Tether are already very long-standing since, in 2017, the digital currency was applied as a tool to artificially inflate the value of Bitcoin during the bull run that took place at the end of that year.
In addition to the above, many suspicions pointed at the company for being the sole responsibility of using reserves to finance external projects. The company did not maintain the proper backing in US dollars to justify the amount of circulating USDT for that moment.
The situation became complicated for Tether since regulatory pressures and doubts from the community highlighted the opacity with which the responsible company has been managing the finances of the digital currency.
This situation opened the doorways for a legal process that lasted a long time, which led to the payment of fines of USD 18.5 million to the New York District Attorney at the beginning of 2021.
However, late last year, the Commodity Futures Trading Commission (CFTC) also imposed another $42.5 million fine on Tether, accusing Tether of misleading statements, precisely for failing to effectively prove that it owned the due backing of all currently circulating USDT.
The Elephant in the Room
Facing all these previously mentioned allegations and many others, Tether has been at the center of political discussions for various regulatory entities. The chairman of the Senate Banking Committee, Sherrod Brown, highlighted that he had struggles when contacting Tether executives and gaining access to precious data about their activities.
On the other hand, the parent company of Tether, Bitfinex, has had problems with certain media outlets, especially the case of CoinDesk, with whom they have come into conflict due to the coverage of various situations linked to the company and the stable coin.
By Jenson Nuñez
