Analysts Debate Role of Stablecoins as Tether Tops $100 Billion

Tether, the leading global stablecoin, reportedly surpassed $100 billion in circulation this week.

This milestone has fueled debate about the role of digital currencies in finance, Reuters reported Tuesday (March 5).

Tether aims to offer stability, tying its value directly to the U.S. dollar, and says it backs each token with dollar-denominated reserves, according to the report.

These tokens facilitate easy fund transfers across crypto trading platforms without using the traditional banking system, the report said.

However, Tether’s rapid growth and large reserves have raised concerns among regulators and analysts about potential risks to the financial system, per the report. They fear that a failure in Tether could destabilize both the cryptocurrency market and the broader financial market.

Despite skepticism, Tether has emphasized its commitment to transparency and financial prudence, according to the report. Tether’s reserves include a mix of U.S. Treasurys, precious metals, bitcoin, and secured loans, according to its most recent reserve report.

In addition, observers said that Tether has a track record of being a lower-risk option among digital assets in a volatile crypto market, per the Reuters report.

Yet, calls for more thorough audits and transparent financial statements persist, the report said. The regulatory landscape for stablecoins like Tether remains unclear, with no specific guidelines on reserve management, causing caution among financial institutions against potential instability.

It was reported Feb. 1 that JPMorgan Chase raised concerns about Tether’s compliance and transparency.

The the bank’s report said there are risks associated with Tether’s market dominance, as what it called a lack of regulatory compliance and transparency on the part of the company could potentially pose a threat to the overall crypto market.

Responding to Bloomberg about that report, a Tether spokesperson said that the stablecoins are needed by those who use them and that Tether works closely with global regulators to educate them about the technology.

When announcing on Jan. 31 that its USDT stablecoin was climbing toward $100 billion, Tether CEO Paolo Ardoino said on the company blog that the company is dedicated to “liquidity and stability.”

“Tether’s Q4 attestation underscores our commitment to transparency, stability and responsible financial management,” Ardoino said.