Persistent Challenges to Credibility
Tether, the first and most prominent stablecoin pegged to the US dollar by market value, has consistently faced challenges to its credibility. Despite numerous allegations and controversies, Tether (USDT) has managed to sustain its market presence and continue evolving its ecosystem.
Recent Corruption Allegations
New accusations of corruption have recently emerged against Tether's issuing company. Prominent trader and market expert Peter Brandt has suggested that Tether could be the next major failure akin to the FTX collapse. Brandt shared his concerns on the social media platform X (formerly Twitter), predicting that the stablecoin is heading towards disaster.
Indications of Serious Trouble
Brandt’s concerns align with those of Consumers' Research, a nonprofit organization actively campaigning against Tether. The organization has labeled Tether a threat to consumers and shared its findings in a post on June 19, which Brandt echoed. Brandt has long argued that Tether is doomed, asserting that the US dollar might eventually collapse, but only after Tether meets its downfall.
Accusations Against Tether
Consumers' Research has accused Tether of engaging in dubious business practices, including a refusal to undergo a comprehensive audit for over a decade and alleged connections with illegal activities such as terrorism, drug trafficking, and human trafficking. These accusations were highlighted in a digital billboard in Times Square, New York, declaring "Tether towards corruption." According to Will Hild, CEO of Consumers' Research, Tether's lack of transparency and its questionable use by illicit actors signal that it could become the next major collapse in the cryptocurrency space, much like FTX.
Calls for Transparency and Accountability
Consumers' Research has criticized Tether for misleading the market regarding its US dollar backing and for receiving a high-risk rating from S&P. The organization also pointed out Tether’s consistent refusal to undergo an independent financial audit, raising doubts about its claims of holding sufficient reserves to back its stablecoin 1:1 with the US dollar.
Maintaining the Dollar Peg
Despite these serious allegations and an extensive campaign against it, USDT has managed to maintain its peg to the US dollar. The durability of this peg in the face of persistent scrutiny remains uncertain. History has shown that stablecoins can rapidly lose value when their issuing companies face legal or credibility challenges, as seen with Terraform Labs' UST and Circle's USDC.
Historical Context and Market Reactions
The most notable collapse was that of Terraform Labs' algorithmic stablecoin LUNA/UST in May 2022, which was later revealed to be fraudulent. Another significant event was the temporary loss of the 1:1 peg by Circle's USDC in March 2023, due to its exposure to the failure of Silicon Valley Bank (SVB).
Conclusion
Tether’s future remains uncertain amid ongoing allegations and scrutiny. Whether it can continue to maintain its stability and credibility in the market will depend on how it addresses these challenges and the extent to which it can assure stakeholders of its financial integrity.
