Tether to pay $41m for claiming its stablecoins were fully backed by US dollars

Tether, the world’s largest issuer of stablecoins, has agreed to pay a $41m penalty to resolve a US regulator’s claims that it had falsely represented that its digital tokens had been absolutely backed by US {dollars}.

The Commodity Futures Buying and selling Fee on Friday alleged that Tether — whose digital tokens are pegged to fiat currencies such because the greenback — made deceptive statements from a minimum of June 2016 to February 2019 about having ample greenback reserves to again every of its stablecoins in circulation.

Stablecoins act as crypto-native {dollars} and a bridge between crypto and conventional monetary worlds. They permit merchants to extra simply hop out and in of cryptocurrencies like bitcoin, and are purported to have a set value and be backed one-for-one always.

Tether has issued greater than $69bn of stablecoins as demand has soared, and critics have repeatedly questioned if Tether’s reserves are absolutely backed.

The CFTC order discovered that Tether held ample fiat reserves in its accounts to totally again tokens in circulation for under 27.6 per cent of the times from September 2016 by to November 2018.

The CFTC additionally ordered cryptocurrency trade Bitfinex to pay a civil penalty of $1.5m, discovering that it had carried out unlawful retail commodity transactions from a minimum of March 2016 to December 2018. The CFTC mentioned it additionally didn’t register as a “futures fee service provider”.

“This case highlights the expectation of honesty and transparency within the quickly rising and growing digital property market,” mentioned Rostin Behnam, CFTC performing chair.

Tether settled the case with out admitting or denying legal responsibility, in response to the order. It claimed in an announcement that there was “no discovering that Tether tokens weren’t absolutely backed always — merely that the reserves weren’t all in money and all in a checking account titled in Tether’s title, always . . . [Tether] has at all times maintained satisfactory reserves and has by no means didn’t fulfill a redemption request”.

It added that no alleged violations linked to Bitfinex, whose house owners additionally management Tether, emerged after December 2018.

The 2 teams beforehand agreed an $18.5m settlement with the New York attorney-general, who accused them of deceiving purchasers over their reserves after struggling a severe lack of funds when their fee processors’ accounts had been frozen.

The expansion of stablecoins has attracted contemporary scrutiny from international banking and markets regulators that the tokens’ operators may set off contagion in credit score markets in the event that they had been compelled for any cause to unwind their reserves.

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