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TETHER STABLECOIN MUST PROVE ITS BACKING, SAYS COURT
Tether must prove it has 1 to 1 dollar reserves or equivalent backing for its USDT stablecoin.
That was the directive last week issued by Judge Katherine Polk Failla of the Southern District of New York’s U.S. District Court, as part of a case that stems back to 2019.
The case originated with a complaint by investors against several companies including iFinex, Tether and Bitfinex’s parent company, claiming in part that unbacked stablecoins were being issued to drive up the price of bitcoin and other cryptocurrencies.
Crypto speculators commonly use stablecoins together with DeFi apps to leverage positions in crypto coins, in order to score and hold onto profits.
According to crypto news outlet Cointelegraph.com, the court’s order requires Tether to submit records including “general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements.”
The ruling comes following a major failure earlier this year of several linked stablecoin tokens of Terra, in which holders lost millions. The stablecoin LUNA, which was designed to keep a 1-to-1 peg to the dollar via an algorithm and associated token, saw a huge run against it when its peg began to slip.
The coin precipitously crashed to pennies on the dollar.
The two largest dollar tied stablecoins are currently USDT and USDC, which is owned by Circle and backed with dollar reserves held by major financial institutions including BlackRock and BNY Mellon.
Tether being compelled to prove its backing could benefit the crypto sector by providing transparent assurance in the stablecoin.
Congress and the Biden administration are currently formulating potential policies regarding cryptos that could see legislation regulating stablecoins to ensure the sort of transparency compelled in the Tether court case.
But some worry that instead of being content to ensure that stablecoins pegged to the dollar are backed by dollars, that the U.S. will try to supplant stablecoins or even suppress the entire crypto sector while issuing a “retail” Central Bank Digital Currency (CBDC).
Many fear that such a CBDC would perpetuate money and financial manipulation that has plagued the dollar in the modern era, and torpedo innovations and efficiencies that have an enormous potential to create wealth and value on a scale that some have likened to the advent of personal computers and the Internet.
NEW KRAKEN CEO SAYS NO NEED TO REGISTER WITH SEC
Crypto exchange Kraken will not seek any registration with the Securities and Exchange Commision in the U.S. since the tokens traded on its platform are not securities.
So says new CEO Dave Ripley.
“There are not any tokens out there that are securities that we’re interested in listing,” Ripley said regarding the SEC, according to Cointelegraph.com.
Kraken is currently the 16th largest centralized cryptocurrency exchange, in Coinranking.com estimates.
Kraken is taking the position that the crypto tokens that trade via its exchange are commodities, not securities.
Meanwhile, SEC Chair Gary Gensler repeated his contention that he believes many cryptos are securities, and intermediaries (like Kraken) should register with multiple U.S. governmental agencies.
“Crypto intermediaries may need to one day register with both the SEC and the Commodity Futures Trading Commission (CFTC),” said Gensler, observing that some intermediaries had already registered with both oversight agencies.
A decision in the ongoing SEC lawsuit vs. Ripple and its XRP crypto token would very likely impact the current regulatory climate. But at this point, there’s no sense of how much longer that suit may drag out, though some recent developments have spurred a rally of the XRP token.