Coinspeaker
Tether’s Lack of Third-Party Audits Raises Concerns of FTX-Like Liquidity Crisis
USDT USDT $1.00 24h volatility: -0.1% Market cap: $119.10 B Vol. 24h: $55.25 B stablecoin issuer Tether has always attracted regulatory scrutiny over its operations, and more so since it dominates 75% of the overall stablecoin market. With a market cap of $119 billion Tether (USDT) is the largest stablecoin, and nearly three times the size of its immediate competitor USDC coin. Some market analysts have recently raised concerns about the possibility of an FTX-like liquidity crisis for the stablecoin giant. Justin Bons, founder of Cyber Capital, sparked the latest wave of concerns by expressing his belief that Tether could potentially be a bigger scam than FTX.
In his post last week on the X platform, he wrote:
“[Tether is] one of the biggest existential threats to crypto as a whole. As we have to trust they hold $118B in collateral without proof! Even after the CFTC fined Tether for lying about their reserves in 2021.”
Back in 2021, the US CFTC fined Tether a massive $41 million civil penalty for lying that they fully backed the USDT stablecoins with reserves. Over the last two years, the USDT market supply has further increased by 20% raising concerns as Tether now dominates 75% of the stablecoin market.
Some market analysts think that Tether could also implode like FTX, if not audited duly by third-party agencies. According to Sean Lee, co-founder of IDA Finance, while FTX collapsed due to its failure to meet $6 billion in customer withdrawals within three days, a potential Tether implosion would likely be tied to its banking partners.
Back during the crypto winter of May 2022, Tether facilitated more than $16.7 billion worth of USDT customer withdrawals swiftly within 10 days. On the other hand, Washington Mutual Bank failed to honor $16.5 billion worth of withdrawals within 10 days, back during the 2008 financial crisis.
Is Tether Too Big to Fail?
Some people think Tether is too big to fail. Anndy Lian, an author and blockchain expert, believes Tether is unlikely to encounter problems. However, he cautioned that large centralized entities can still present risks to the cryptocurrency space. Lian added:
“Cryptocurrencies were originally designed to operate without central control, promoting transparency, security, and user autonomy. However, Tether, as a centralized stablecoin issuer, holds significant influence over the crypto market due to its widespread use for trading and liquidity.”
Earlier this month, Tether made a massive investment of $100 million in the Latin American agricultural giant Adecoagro, while taking a 9.8% stake in the firm.
Tether’s Lack of Third-Party Audits Raises Concerns of FTX-Like Liquidity Crisis
