Tether, the world’s largest stablecoin issuer, agreed to pay a fine of $ 41 million to resolve allegations by a U.S. regulator that it falsely claimed its digital tokens were fully backed by U.S. dollars.
The Commodity Futures Trading Commission on Friday alleged that Tether – whose digital tokens are tied to fiat currencies such as the dollar – made misleading statements from at least June 2016 to February 2019 about having dollar reserves. sufficient to support each of its stable coins in circulation.
Stablecoins act as crypto-native dollars and a bridge between crypto and traditional financial worlds. They make it easier for traders to enter and exit cryptocurrencies like bitcoin, and are meant to have a fixed price and be supported one-to-one at all times.
Tether issued more than $ 69 billion in stablecoins as demand skyrocketed and critics repeatedly questioned whether Tether’s reserves were fully guaranteed.
The CFTC order revealed that Tether held sufficient fiduciary reserves in its accounts to fully safeguard outstanding tokens for only 27.6% of the days from September 2016 to November 2018.
The CFTC also ordered the cryptocurrency exchange Bitfinex to pay a civil fine of $ 1.5 million, believing it had carried out illegal commodity transactions from March 2016 to December 2018. The CFTC has stated that she had not registered as a “term commission merchant” either. .
“This case highlights the expectations of honesty and transparency in the rapidly growing and developing digital asset market,” said Rostin Behnam, acting chairman of the CFTC.
Tether settled the case without admitting or denying responsibility, according to the order. He claimed in a statement that there was “no conclusion that the Tether tokens were not fully secured at all times – just that the reserves were not all in cash and all in a bank account titled in the name. of Tether, at any time. [Tether] has always kept sufficient reserves and has never failed to meet a redemption request ”.
He added that no alleged breaches related to Bitfinex, whose owners also control Tether, have emerged after December 2018.
The two groups previously agreed to an $ 18.5 million settlement with the New York attorney general, who accused them of cheating clients on their reserves after suffering a severe loss of funds when the accounts of their payment processors have been frozen.
The growth of stablecoins has drawn further scrutiny from global banking and market regulators that token operators could spark contagion in credit markets if they are forced for some reason to unwind their reserves.