The Banking Committee sent a letter to the CEO of Tether to request information about said stablecoin.
The chairman of the United States Senate Banking Committee, Sherrod Brown, wrote yesterday a letter to the executive director of Tether Holdings Limited, Jean-Louis van der Velde, requesting information on stable currency Tether (USDT).
He begins the letter by commenting that, according to the latest report of the President’s Working Group on Financial Markets (PWG), the stablecoins or stablecoins threaten the protection of investors and the integrity of the market. The increasing use of stablecoins and their relevance to digital asset transactions highlights the need to better understand the fundamental workings and limits of Tether.
It is worth noting that, by and large, Tether it is the most important stablecoin on the market. With daily transactions over USD $ 82 billion, as can be seen in CryptoMarkets, It is the currency that is most used to acquire cryptocurrencies such as Bitcoin or Ethereum. The volume of daily operations with Tether almost triples those of Bitcoin and quadruples those of Ether.
Senator Brown’s concerns
Brown noted that the market value of stablecoins produced by major stablecoin issuers reached $ 127 billion in October 2021, an increase of nearly 500% over the previous year. Additionally, the complexities of digital assets and stablecoins and the requirement for reliable and robust networks can make it difficult for investors and consumers to fully understand their roles and risks.
On this note, Brown stated in the letter:
“I have significant concerns with the non-standard terms applicable to the exchange of particular stablecoins, how those terms differ from traditional assets, and how those terms may not be consistent across digital asset trading platforms.”
The senator adds: “Although stablecoins are generally ‘minted’ in exchange for US dollars or another conventional currency, purchasing stablecoins through a trading platform may not provide clients with the same rights and benefits as a direct purchase from an issuer. . Furthermore, clients may have different rights depending on the amount of stablecoins owned or traded ”.
It also says: “Also, because the term stablecoin is widely used, users may not appreciate the complexity and different characteristics and terms of each stablecoin.”
Therefore, he asks a series of six questions to Tether for information from the CEO to help elucidate the critical work items of Tether:
“Given the importance of the specifics related to the use of Tether for investors and consumers, please answer the questions below in clear and direct terms”, He says.
The Senator’s Questions
The questions involved describing the fundamental processes of buying, exchanging or minting Tether in US dollars and explain how to exchange Tether for US dollars. In addition to identifying the minimum amount of reimbursement, the waiting time and describing the internal evaluations or studies.
They are as follows:
- Describe the basic purchasing, exchange, or minting process by which customers can purchase Tether for US dollars. In your response, please explain any limitations or qualifications relevant to participating and completing that process.
Detail the process to redeem Tether and receive US dollars. Here, too, identify any requirements or limits, including minimum trade-in size, waiting period, or qualifications.
Since the beginning of Tether, How many tokens have been issued and how many have been redeemed? During the past 12 months, what is the highest percentage of Tether in circulation at the beginning of a calendar week for redemption within seven days?
Briefly characterize the market or operating conditions that would prevent the purchase or exchange of Tether for US dollars or other digital asset. To answer this question, do not list or describe the legal or regulatory limitations that are currently outlined in a user agreement or terms of service. For each condition identified, provide at least one example that has occurred in the past 12 months and its duration.
Identify trading platforms that have enhanced capabilities, privileges, or special agreements with respect to Tether, identifying those characteristics and their basis (for example, contractual or common control).
Summarize any internal reviews or studies your company has conducted on how specific levels of swaps would affect Tether, including its convertibility into US dollars, or it would affect the financial position of your company.
Background of Tether
Previously, executives of the digital asset exchange Bitfinex, which is closely related to Tether, said the stablecoin is fully backed by assets including cash, cash equivalents and BTC amid reports that only 74 percent of USDT is backed.
However, on October 15, 2021, the US CFTC issued an order for Tether and Bitfinex will pay fines totaling $ 42.5 million. According to the document, Tether had to pay $ 41 million for claims that the stablecoin Tether it was fully backed by US dollars. It was required that Bitfinex pay USD $ 1.5 million for illegal transactions while operating the cryptocurrency trading platform Bitfinex and the violation of a prior CFTC order.
Tether You have spoken about your legal situation recently. On November 2, in an exclusive interview with DailyBitcoin, the company’s CTO, Paolo Ardoino, who is the one who has shown his face to address the issue, gave some answers related to the backing of the stablecoin.
Version of DailyBitcoin
Picture of Unsplash