Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Crypto Transparency: No Surprise, New York Had A Problem With Tether

By Andy HechtCryptocurrencyJun 16, 2021 13:05
Crypto Transparency: No Surprise, New York Had A Problem With Tether
By Andy Hecht   |  Jun 16, 2021 13:05
Saved. See Saved Items.
This article has already been saved in your Saved Items

This article was written exclusively for

  • The NY Attorney General challenges Tether
  • Case settled in February
  • More transparency needed, but is it possible?
  • Government-issued digital currencies on the horizon
  • The asset class will divide between cryptos and digitals

The term stablecoin, refers to a cryptocurrency whose price is pegged to either another cryptocurrency, fiat money, or exchange-traded commodities, like precious metals or other raw materials.

Tether is a stablecoin cryptocurrency issued by Tether Limited and controlled by the owners of Bitfinex. According to Tether’s white paper on its website:

We propose a method to maintain a one-to-one reserve ratio between a cryptocurrency token, called tethers, and its associated, real-world asset, fiat currency. This method uses the Bitcoin blockchain, Proof of Reserves, and other audit methods to prove that issued tokens are fully backed and reserved at all times.

Tether is the third leading cryptocurrency. It is tied to the US dollar, so it trades at $1 per token.

Tether Ranking
Tether Ranking


On June 15, Tether (USDT) had a market cap of $62.61 billion, which had a 3.62% share of the overall asset classes’ $1.729 trillion market cap. Tether is a cryptocurrency leader, but the NYS Attorney General had a problem with the successful token.

NY Attorney General Challenges Tether

The New York AG alleged Tether and Bitfinex misrepresented their reserves in 2018 and 2019. An investigation uncovered the companies moved hundreds of millions of dollars to cover up a loss of $850 million of commingled client and corporate funds.

The legal battle began in 2019. The government intervention in Tether runs contrary to the cryptocurrency asset classes’ libertarian ideology that removes regulators, government officials, and central banks from the equation.

Case Settled In February

In late February 2021, Tether and Bitfinex came to an arrangement with the NY AG, wherein the companies would pay an $18.5 million fine to settle the dispute. The terms require Tether and Bitfinex to cease trading activity in New York—a global financial capital—and submit quarterly transparency reports.

However, Tether wrote that:

Under the terms of the settlement, we admit no wrongdoing.

The first report, issued in March, revealed opaque uses of funds invested in Tether, the cryptocurrency. Tether held 13% of its assets in secured loans and 50% in commercial paper or short-term unsecured debt. The details of the loans were scarce.

More Transparency Needed, But Is It Possible?

The Commodity Futures Trading Commission (CFTC) is the US regulator that oversees cryptocurrencies. In a recent interview on CNBC, former CFTC Chairman Timothy Massad said, "We need a better framework of regulation for tether and other stablecoins.” He went on to call for more disclosure and challenged the recent March report saying:

We have no idea what kinds of loans those are or who they are to, and we don’t know what kind of paper they’re buying. It’s all a concern, so I think we need more disclosure here.”

The former CFTC Chairman felt the settlement with the AG fell short from a regulatory perspective. Meanwhile, the market’s evolution could cause Tether and other cryptos “pegged” to fiat currencies to become a moot point.

Government-Issued Digital Currencies On The Horizon

China is about to roll out its digital yuan. The Chinese government recently cracked down on crypto trading in anticipation of its digital yuan in what is likely a move to limit competition.

Meanwhile, it will not be long before the US, EU, and other countries worldwide, roll out digital dollars, euros, and other foreign exchange instruments using blockchain technology. Blockchain and digital currencies will improve efficiency, speed, and record-keeping, pushing the foreign exchange arena into the new technological age.

Stablecoins like Tether, that reflect the values of fiat currencies, would not be necessary when digital fiat currencies burst on the scene. Regulators will be far more comfortable with treasuries, government monetary authorities, and central banks managing digital currencies than companies like Tether and Bitfinex.

However, the attraction of libertarian money will continue to challenge the status quo.

The Asset Class Will Ultimately Divide Between Cryptos And Digitals

I believe we will see the new technology divide between two forms of money—digital currencies and cryptocurrencies.

Digital currencies will augment, and likely eventually replace, fiat currencies and come under government control. Cryptocurrencies will continue to reflect the libertarian ideology that takes power away from the official sector.

Meanwhile, since the cryptos challenge the control of the money supply, we could see a regulatory wave that bans, limits, or requires a far higher level of transparency for Bitcoin, Ethereum, and the over 10,00 other cryptos.

Government officials like the NY AG, CTFC, Congress, the EU, and others in the public sector, will use protecting national populations as a reason to put pressure on the cryptocurrency asset class. However, the underlying and overwhelming reason for their interest is to preserve control, as money is a crucial factor when it comes to retaining power.

El Salvador recently became the first country to make Bitcoin legal tender. The move was more of a political statement than a move towards technological advances. El Salvador does not have a currency; it has embraced the US dollar since 2001.

The leadership in the Central American country decided to make a statement to US and European financial institutions and supranational institutions, like the IMF and World Bank, that provide loans and financing for emerging countries. China has been expanding its sphere of influence in emerging markets for decades. Making Bitcoin legal tender was likely more of a political, than an economic, decision.

As the market cap of cryptocurrencies rises, expect more pushback from governments. Controlling the purse strings is not something they will surrender without an epic battle.

Crypto Transparency: No Surprise, New York Had A Problem With Tether

Related Articles

Crypto Transparency: No Surprise, New York Had A Problem With Tether

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email