While this milestone signifies Tether’s growing popularity and success, a recent report by JPMorgan Chase has raised concerns about the company’s compliance and transparency, Bloomberg reported Thursday (Feb. 1).
Stablecoins, such as Tether’s USDT, play a crucial role in the crypto market, according to the report. Pegged to a fiat currency, they serve as a medium of exchange and store of value for traders that is less volatile than other digital assets.
However, JPMorgan’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, per the report.
In response, 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, Bloomberg said.
The scrutiny of stablecoins by regulatory bodies is expected to intensify in the United States and Europe, the report said. The Clarity for Payment Stablecoin Act, currently awaiting a vote in the U.S. House of Representatives, aims to address regulatory concerns. Similarly, the European Union’s Markets in Crypto-Assets Regulation (MiCA) is set to be partially implemented in June of this year.
PYMNTS reported in December that Tether has participated in the crypto industry’s lobbying efforts over the regulation of stablecoins, spending $760,000 on lobbying in the first three quarters of 2023.
JPMorgan analysts said that stablecoin issuers who have adhered closely to existing regulations will benefit from the upcoming regulatory crackdown and gain market share, per the Bloomberg report.
Tether has taken steps to improve transparency, according to the report. The company now provides quarterly attestations, following a $41 million fine paid to the Commodity Futures Trading Commission (CFTC) in 2021 for misleading customers about its reserves.
In a Wednesday (Jan. 31) blog post about the company’s fourth-quarter attestation, Tether CEO Paolo Ardoino wrote: “Tether’s Q4 attestation underscores our commitment transparency, stability and responsible financial management.”
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