Paolo Ardoino, Bitfinex’s outspoken chief technology officer, took to Twitter this week to allay concerns that Tether could be the next target of the US Securities and Exchange Commission.
In response to a tweet from CryptoQuant CEO Ki Young Ju, Ardoino said Tether adheres to the strict KYC / AML regulations set by the Treasury’s Financial Crimes Enforcement Network or FinCEN. In other words, people who say Tether is less regulated are just spreading “FUD,” or fear, uncertainty, and doubt.
Ki Young’s original tweet said, “If SEC’s next target is Tether, it will be very, very bad for this bull run as this market relies heavily on $ USDT.”
Reminder: #Tether is registered and regulated under FinCEN as all centralized competitors. Strict KYC / AML is applied to all direct users of Tether, like the other major publishers do. Less regulated is plain FUD. Ask yourself who will benefit from spreading such misinformation? https://t.co/0izlgpJ75r
– Paolo Ardoino (@paoloardoino) December 30, 2020
While Ardoino isn’t wrong in pointing out Tether’s KYC / AML compliance, he doesn’t really address Ki Young’s central concern that the stablecoin may have circumvented securities laws, especially if dollar reserves are in jeopardy.
In 2019, the New York Attorney General filed a Memorandum of Law alleging that Tether and its sister company Bitfinex had an unregistered securities offering. The document too claims that the companies have lent USDT to investors, suggesting that the coins are not fully backed by US dollar reserves, as is alleged.
Tether’s USDT, which is said to be alone loosely pegged to the US dollar, has been at the center of controversy for years. In 2018, finance professor John Griffin and co-author Amin Shams argued in a research paper that USDT was used to manipulate the Bitcoin (BTC) price as it rose to $ 20,000.
Tether and Bitfinex were subpoenaed by the Commodity Futures Trading Commission in 2018 to seek evidence that USDT is backed by equivalent dollar reserves. Despite the allegations, neither company has been charged with any wrongdoing.
Many within the crypto community are waiting for the next domino to fall after the SEC has filed a lawsuit against Ripple for the alleged execution of an unregulated securities offering. Ripple will have the opportunity to prove his case in court. In the meantime, it is encouraging market parties not to draw any conclusions from the regulator’s allegations.