Cryptocurrency

Digital Currencies Lose $10B On ‘Stablecoin’ Fears

Digital Currencies Fall On 'Stablecoin' Fears

With questions surrounding the legitimacy of a “stablecoin” Tether along with regulatory concerns, the digital currency market lost roughly $10 billion in value over a period of an hour on Thursday (April 25). The move followed an allegation that Bitfinex covered up an $850 million loss with at least $700 million from the cash reserves of Tether, CNBC reported.

According to the report, the attorney general’s office contends the exchange gave Crypto Capital, an entity in Panama, $850 million without telling investors. Bitfinex and Tether officials allegedly “engaged in a series of conflicted corporate transactions.” Those reportedly made Bitfinex gain access to the cash reserves of Tether.

The attorney general’s office said, according to the outlet, “Those transactions – which also have not been disclosed to investors – treat Tether’s cash reserves as Bitfinex’s corporate slush fund, and are being used to hide Bitfinex’s massive, undisclosed losses and inability to handle customer withdrawals.”

Bitfinex, according to the report, claims the court filings by the attorney general were “written in bad faith” and “riddled with false assertions.” It also claims the funds were “not lost but have been, in fact, seized and safeguarded.” The digital currency exchange said in a post on its website, “Bitfinex and Tether have been fully cooperative with the New York attorney general’s office, as both companies are with all regulators.”

Tether is popular with investors, according to a report last year, because it’s supposed to be tied to the U.S. dollar. That has resulted in the firm becoming a crypto bank for digital token firms that have a rough go at banking relationships in real life, providing them with a place to keep their assets and liquidity, per the report. According to a research paper, it has taken on this additional role as the crypto bank because one Tether equals one dollar. It was said at the time Tether had the roughly $2.5 billion needed to back the coins in circulation.

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