Former US Securities and Exchange Commission (SEC) official John Reed Stark has Issue a warning About Tether, the world’s largest issuer of the stablecoin, USDT. In his view, tether could be the next domino to fall, and its promise of transparency and auditing may not be enough to prevent that from happening.
Is the future of Tether in danger?
Stark, who has 35 years of experience studying markets and financial data, including 18 years as an attorney in the SEC’s law enforcement division, believes that Tether is a “massive house of cards” that could collapse at any moment. He argues that the company’s lack of transparency and opaque relationship with its banking partners create significant risks for investors and the broader financial system.
Related reading: Bitcoin investors are turning to Litecoin as high fees make the chain uneconomic
Additionally, John Reed Stark called attention to the company’s lack of regulatory restrictions and its unaudited financial reserves, calling it a “red flag” for fraud investigators. Despite promises of transparency and auditing, Tether only offers “certifications” which are different from audits and only assess the accuracy of data at a specific point in time.
However, contrary to concerns raised by former SEC Chairman John Reed Stark, Tether recently released its 2023 Q1 Assurance Report, which was endorsed by BDO Italia – one of the top five independent global public accounting firms. The report reaffirms the accuracy of the company’s Consolidated Reserves Report (CRR), which provides a detailed breakdown of Tether’s assets as of March 31, 2023.
Furthermore, in a huge step towards transparency, Tether’s CRR now includes additional categories such as physical gold, overnight buybacks, corporate bonds, and bitcoin ownership. These new categories are designed to increase transparency in reserves reporting. The report also reveals an increase in excess Tether reserves, which reached an all-time high of $2.44 billion, compared to $1.48 billion in the previous quarter.
Notably, Tether is headquartered in Road Town, Trinity Chambers, BVI, and has been promising transparency and auditing for the past seven years. However, Stark has expressed doubt that the company has kept its promises and believes its claims of transparency are nothing more than “smoke and mirrors”.
Former Securities and Exchange Commission chairman and chief technology officer in a heated exchange struggle
Former SEC Chairman John Reed Stark answered To Tether’s CTO, Paolo Ardoino, after Ardoino shared a link to the company’s most recent endorsement report in response to Stark’s concerns about the stablecoin. While Stark acknowledged Arduino’s response and appreciated the availability of financial data, he remained skeptical about its stability and transparency.
– Paolo Ardoino 🍐 (@paoloardoino) May 10, 2023
Stark highlighted the fact that tether has opted out of the SEC’s laws, rules and regulations, unlike traditional SEC-registered financial firms. He expressed bewilderment about how an $80 billion financial company like Tether could do business with confidence without a formal audit being published with certified financial statements, as every US public company does.
Stark also questioned why the chief technology officer (CTO) was the company’s official charged with making representations about the company’s financial reliability, reliability, and credibility.
He expressed concern that Tether has been repeatedly punished for “lying” about its reserves, has been banned in Ontario, and is reportedly under criminal investigation by the US FBI and Department of Justice for bank fraud.
Related reading: Shiba Inu gets a boost with its addition of LunarCrush to its trading platform
Furthermore, Stark asserted that Tether is not subject to regulation, despite the implications for the company to the contrary. He explained that regulatory frameworks come in all shapes and sizes and not all are equally robust, robust and effective.
Despite these concerns, USDT remains one of the most used stablecoins in the cryptocurrency world, and its market capitalization has grown to over $80 billion.
However, if Stark’s warning is heeded, Tether’s days as a dominant player in the stablecoin market could be numbered.
Featured image from Unsplash, chart from TradingView.com
