Investors are increasingly worried about Tether, the world’s largest stablecoin issuer, due to its persistent refusal to undergo an independent, third-party audit. With over $118 billion in circulation, concerns about Tether’s opaque operations are growing. Investors fear a potential liquidity crisis similar to the downfall of FTX, the infamous cryptocurrency exchange.
Cyber Capital Founder Highlights Tether Risks
Justin Bons, the founder of Cyber Capital, has recently explained the risks of Tether. On September 14, in an X post, Bons described Tether as a “major threat” to the crypto space. He pointed out that the company is asking the public to believe that it has $118 billion in reserves with no evidence. This lack of transparency is not new. In 2021, the U.S. CFTC charged Tether a $41 million penalty for making false statements about its reserves.
Tether controls more than 75% of the stablecoin market, having grown its market share by 20% over the past two years. This dominance is causing even more concern. Investors fear Tether’s size and lack of transparency could lead to a collapse like FTX.
FTX Collapse Comparisons
FTX failed to process $6 billion in withdrawals in three days, causing the loss of $8.9 billion in customer funds. Although Tether has avoided such a collapse so far, doubts persist. In May 2022, Tether processed $16.7 billion in withdrawals within 10 days.
CryptoTale reported earlier that Consumers’ Research, a U.S. advocacy group, has warned about Tether. The group criticized Tether for failing to provide proof of reserves. Since 2017, Tether has promised a full audit but has yet to deliver. Consumers’ Research also raised concerns that Tether’s lack of transparency could help criminals bypass sanctions.
Tether Assists Law Agencies Recover $108.8M in Illicit USDTRecently, Tether invested $100 million in Adecoagro, a Latin American agricultural firm. Critics see this as another red flag. Just two individuals control the company’s governance structure. This lack of oversight raises questions about how Tether manages its vast reserves.
Although Tether continues asserting that independent parties audit its reserves, critics have noted that these are not as comprehensive as audits. Until Tether agrees to a thorough audit by an independent party, skepticism will persist, and the threat of a crisis would persist for the stablecoin behemoth.
