A report Tuesday (Aug. 29) by Bloomberg News — citing sources familiar with the matter — said the stablecoin issuer had instructed customers to send funds to Britannia in recent months.
According to Bloomberg, it is not clear when the relationship began. PYMNTS has contacted both Tether and Britannia for comment but has not yet received a reply.
The report notes that Tether, registered in the British Virgin Islands, hasn’t made public the extent of its banking partnerships.
“The secrecy surrounding Tether’s banking relationships continues to be a major impediment for developing the cryptocurrency industry, deterring regulatory approvals on other matters, and discouraging traditional asset managers with little tolerance for regulatory risk from more active participation in the space,” Patrick Tan, general counsel for ChainArgos, a blockchain data analytics firm, told Bloomberg.
As noted here earlier this year, crypto companies have struggled to find U.S. banking partners following the downfall of Signature and Silvergate banks, both of which were strongly associated with the digital asset sector.
Earlier this month, the Federal Reserve released guidelines for member banks that deal with stablecoins, requiring them to get written permission from the central bank Reserve before issuing, holding, or transacting in dollar tokens.
“The requirement is aimed at ensuring that banks have appropriate risk management practices in place, including systems to identify and monitor potential risks such as cybersecurity threats and illicit finance risks,” PYMNTS wrote earlier this week.
In addition, the Fed has created the “Novel Activities Supervision Program,” which supervises crypto-assets, distributed ledger technology (DLT) and technology-driven partnerships with nonbanks, to strengthen oversight of tech-driven activities.
“The goal of the novel activities supervision program is to foster the benefits of financial innovation while recognizing and appropriately addressing risks to ensure the safety and soundness of the banking system,” the Fed said in a news release earlier this month.
However, a trio of Republican lawmakers on Monday (Aug. 28) criticized the Fed’s actions, saying the regulator was undercutting congressional plans for laws governing stablecoins.
“Moreover, if these letters are left in place, they will undoubtedly deter financial institutions from participating in the digital asset ecosystem,” the legislators wrote.
“Congress understands the need to provide regulatory certainty for payment stablecoins and the broader digital asset ecosystem. A regulatory framework established by Congress will better protect consumers and provide certainty to market participants.”