Opinion: Tether is a giant house of cards

Former US Securities and Exchange Commission (SEC) official John Reed Stark named his “giant house of cards”.

In his Twitter post, Stark addressed the various issues that the stablecoin issuer has. According to the former SEC official, his experience and study of markets and financial reports in recent years suggests that the stablecoin issuer could be the next domino.

What’s wrong with Tether

In particular, he pointed out that Tether operates without regulatory restrictions, since there is no legal framework governing its activities in the United States. Moreover, US regulators themselves do not know what requirements to put on the issuer.

Therefore, Stark added, customers are left to deal with Tether’s “condescending and ineffective public relations chatter, hype and hype.”

Stark also questioned Tether’s attestation, stating that it cannot replace auditing. He noted that audits are aimed at identifying potential risks. At the same time, attestations only check whether the data presented is accurate at the moment. Therefore, the US should follow the example of Canada, which banned the offer of Tether, and do the same.

Tether at its peak

Despite Stark’s scathing criticism, Tether reported a net profit of $1.48 billion for the first quarter of 2023 a few days ago. At the same time, the excess reserves of the company amounted to $2.44 billion.

One possible reason for the good performance is the problems of USDT’s main competitor, USD Coin (USDC). In March, the stablecoin lost its peg to the US dollar after the fall of California-based Silicon Valley Bank.