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Tether is still under regulatory scrutiny, with all eyes on its commercial paper reserves.
Tether, the world’s leading stablecoin, is under increased regulatory scrutiny this week, with US financial regulators scrutinising the composition of its reserves.
According to a July 27 Bloomberg report the Acting Comptroller of the Currency Michael Hsu said regulators are looking into Tether’s stockpile of commercial paper to see whether each USDT token really is backed by the equivalent of one U.S. dollar.
A group of regulators led by Treasury Secretary Janet Yellen met behind closed doors to discuss the risks posed by stablecoins, particularly Tether. According to the report, the President’s Working Group on Financial Markets was concerned about Tether’s claims that it holds massive amounts of commercial paper, citing “people familiar with the matter.” This investment type is related to debts issued by businesses to meet their short-term funding needs.
The group compared the situation to an unregulated money market mutual fund that could be susceptible to an exodus of investors. The current circulating supply of USDT is 62 billion according to its transparency report.
Tether disclosed a loose breakdown of its reserves in mid-May, stating that it had invested in instruments other than cash and cash equivalents, such as Bitcoin, bonds, secured loans, and a large proportion of commercial paper. Tether general counsel Stuart Hoegner promised CNBC on July 21 that a full financial audit of its reserves would be completed within months, not years.
On July 19, Yellen urged agency lawmakers to “act quickly” to ensure that stablecoins are subject to appropriate rules and that a regulatory framework is developed for them.
On July 27, crypto cynic Senator Elizabeth Warren sent a letter to Janet Yellen asking for greater regulation of the crypto industry. At a hearing of the Senate Banking Committee, Warren again expressed her opposition to crypto:
“Instead of leaving our financial system at the whims of giant banks, crypto puts the system at the whims of some shadowy, faceless group of super-coders and miners, which doesn’t sound better to me.”
Partner at Anderson Kill Law, Preston Byrne, commented that “the far more frightening reality here is that the financial system is in the hands of Elizabeth Warren.”