Tether Under Fire: Cyber Capital Founder Calls $118 Billion Firm A ‘Scam’

Tether, at the moment the largest stablecoin in terms of market capitalization, has returned to the focus again as new accusations are raised regarding the company’s activity. Tether has been accused of being a $118 billion scam by Justin Bons the founder of Cyber Capital, a famous European crypto fund, joining several other well-known issues regarding the company’s solvency, capital buffers, and general authenticity.

Similar to how BTC stands for Bitcoin, SHIB for Shiba Inu, and so on, USDT is the ticker for Tether. The price typically stays at $1, although occasionally, the stablecoin loses its peg with the US dollar due to a failure to maintain backing.    

Charge from founder of a European Crypto Fund 

The head of a European crypto fund recently went on the record to proclaim that Tether is a fraud and that the $118 billion worth of assets backing the crypto token was more fiction than fact. These allegations mainly stem from the fact that Tether’s reserve procedures are opaque and are a point of concern for many. Tether, whose USDT tokens are continuously issued in the market is criticized to lack full backing of real dollars and others resulting into fear if they could again bring about the collapse of digital currencies. 

While listing various issues that investors should consider before investing in the projects built on the Omni layer, the founder noted that Tether still has no end-to-end audit. Tether is one of the most popular stablecoins in the world, but it has not made the financial audits that would ensure that. 

History of Tether Controversies 

Tether has always been in the crosshairs since the creation of the project. While initially signifying that every USDT token it issued is fully backed by U. S dollars, the company revealed that only 2% of its reserves are in cash with the rest of the funds being in other assets such as commercial paper and loans. This revelation, made in 2021, led to a greater amount of skepticism about the company’s credibility.

The problems were not over yet. Tether said in 2021 that it would agree to pay a fine of $18mn. , including $7. 5 million to reimburse an investigation conducted by New York’s attorney general office, which had accused the company of low-grade fraud because of the ways it misreported its reserves. This legal settlement only added to the worries that Tether is not as ‘safe’ as the name implies. 

Furthermore, further concerns in Tether’s practices were revealed in a recent report from Consumers’ Research. They also highlighted that the tether promised audit has been consistently canceled and that adds to skepticism relating to the company’s assertions resulting in full transparency and availability of sufficient reserves. These have made many in the industry to wonder and inquire if Tether could be a systemic risk to the whole crypto market. 

Tether’s Defenses: This is a Balancing act 

Nonetheless, Tether has always come out in defense of its operations as alleged by some people. The company has been trying to argue that they are 100% transparent in regard to the users and the funds, as well as more than bullishly covering the circulating USDT. It has also noted that other attestation reports from third party firms although they are not full audits have been conducted to ascertain that its reserves is industry acceptable. 

Tether has gone further to provide clear indications to the effects of the USDT as a highly critical component of the digital currency market with billions of USDT being used in trading, remittance and other financial purposes. The company continues the fact that these use cases prove the confidence of the crypto community in Tether and that Tether is actually stable. 

However, these defenses have not managed to completely address customers’ concerns and more so in light of the emerging and constant change of regulations around stablecoins. Most experts share the view that future actions of government agencies may result in more severe actions against Tether and pressure the company to release more detailed and comprehensive audits.

Growing Scrutiny of Stablecoins 

Tether is not the only crypto-based company that has recently been facing increased attention. The entire idea of stablecoins is being put under pressure from regulators and industry experts within the financial markets. Currently, with market capitalization above $120 billion, stablecoins such as Tether, USD Coin, and Binance USD are effectively regulating the functioning of the crypto market. Nonetheless, because of their comparatively obscure character, the possibility of financial risk, and their increasing roles in the financial systems of the world’s economies, regulators have become increasingly interested in them. 

This year in the United States the Biden administration introduced a bill that eliminated the possibility of leveling the legal treatment of stablecoins as banks as they are now, the bill has proposed tighter regulations for stablecoin issuers. In Europe, it is the just signed Markets in Crypto-Assets (MiCA) regulation that is set to provide more transparency to stablecoins and demand more reliable reserves from their issuers. 

With stablecoins being considered a significant figure in global financial systems, it only makes sense that regulators will step up regulation efforts. Still, whether Tether is ready to face this increasing attention remains to be seen. 

Future of Tether as a Road Map 

Tether has been involved in a lot of scandals and controversies from all over the world including the recent one which involved a European crypto fund founder. Despite the fact that the company has denied any allegations of wrongdoing and defended its action, the fact that the company did not complete an audit and the fact that its reserves remain questionable, it is very much an issue. This is especially true given that the regulators are increasing their pressure on stablecoins, which means that the long-term prospects of Tether – the pioneer of the sector – and the entire sector of stablecoins, are very bleak. 

Currently, Tether occupies almost 88% of all funds associated with cryptocurrencies, thus it is dominating the whole crypto market and the question here is whether Tether can persist in development under growing pressure and new regulations advocates during the years to come? For now, the firm is entrenched at the very center of the cryptocurrency market, although its development appears precarious.