$USDT: Consumers’ Research Issues Warning to U.S. Governors About Alleged Risks of Tether

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As a seasoned crypto investor with over a decade of experience navigating the digital asset market, I find myself constantly evaluating the risks and benefits of various investments. The recent warning from Consumers’ Research about Tether has certainly piqued my interest and raised some concerns.

On September 12, 2024, Consumers’ Research, America’s longest-standing consumer watchdog group, released a public alert to all U.S. state governors about potential risks linked to the fiat-backed stablecoin issuer Tether (USDT).

Consumers’ Research is a non-profit group dedicated to enlightening consumers on different products, services, and marketplace matters. Established back in 1929, it initially aimed at offering impartial and precise data to assist people in making wise decisions about their product choices. As the years passed, its purpose grew to include championing consumer rights, unmasking misleading business tactics, and pushing for openness in the market.

As an analyst, I’m deeply involved in initiatives that raise public awareness, carry out research, and prepare reports. The goal? To educate consumers about a wide range of issues, from financial matters to privacy concerns, that significantly affect their daily lives. It’s crucial to note that our work is free from any government or corporate influence, ensuring we can dedicate ourselves wholeheartedly to providing consumers with transparent and straightforward information, ultimately empowering them to make informed decisions.

As reported by Consumers’ Research, Tether, a company managing a stablecoin allegedly pegged at a 1:1 ratio with the US dollar, has yet to prove this assertion through a third-party review, despite repeated assurances over many years that they would.

The company has voiced worry about Tether not seemingly fulfilling its promise to undergo a reliable financial review, which might potentially put consumers in danger due to hidden financial risks. Consumers’ Research asserts that despite promises from Tether’s management, such as the CEO stating in 2022 that an audit would be finished “in a matter of months,” no such evaluation has taken place. The organization advises that this reported lack of transparency could lead to severe repercussions for consumers who trust Tether’s assertions about having dollar reserves.

To add on, it’s been noted by Consumers’ Research that Tether has been implicated in dubious activities historically. They highlight a 2019 probe where New York authorities claimed that Tether transferred huge sums of money to conceal a shortfall of $850 million in client assets. Moreover, Consumers’ Research cautions that Tether seems to share characteristics with failed cryptocurrency companies such as FTX and Celsius, which they warn might lead to financial losses for consumers.

The organization expresses worries over Tether’s alleged ties to entities under U.S. sanctions. As reported by Consumers’ Research, Tether has been linked to transactions with Garantex, a Russian cryptocurrency exchange that received sanctions from the U.S. Treasury in 2022. Additionally, the group alleges that Tether continues to handle transactions via BitPapa, an exchange that was sanctioned for supposedly supporting Russia’s military action against Ukraine.

As a concerned crypto investor, I strongly advise state governors to scrutinize the accessibility of Tether within their jurisdictions. It’s crucial that appropriate measures are taken to safeguard citizens from potential financial risks associated with this cryptocurrency.

Contrary to the apprehensions voiced by Consumers’ Research, Tether Holdings Limited published an Independent Auditors’ Report for the second quarter of 2024, prepared by BDO Italia – an independent auditing firm. Based on this report, as of June 30, 2024, Tether’s assets were found to be more than its liabilities by a significant $5.33 billion. This audit encompasses Tether’s Consolidated Financials and Reserves Report, thereby verifying that the company’s stablecoin, USDT, is backed by assets like cash, U.S. Treasury bills, precious metals, Bitcoin, and other investments.

Independent auditors from BDO Italia carried out a thorough examination, checking bank statements, matching balances to confirm the listed assets by Tether, and sampling secured loans to ensure they were properly collateralized. This independent review aims to guarantee that Tether’s issued tokens, including USDT, are backed by the required reserves, thereby addressing some of the transparency concerns.

According to a report from BDO Italia, the value of Tether tokens’ reserves surpasses their companies’ liabilities by approximately $5.33 billion. Tether’s leadership has chosen to use International Financial Reporting Standards 9 (IFRS 9) for asset valuation, ensuring that their assets, including gold investments and other digital assets, are appropriately recorded at current market value.

In a bid to alleviate worries about transparency and illegal actions, Tether has made significant progress in recent months. As reported by Decrypt today, Tether plans to appoint Philip Gradwell, a former chief economist at Chainalysis, in July 2024, to generate reports on USDT usage for American regulators and investors. This action is an extension of Tether’s broader objective to improve transparency and responsibility, primarily as a response to the growing regulatory oversight within the cryptocurrency sector.

Beyond this, the Decrypt report brought attention to Tether’s collaboration with law enforcement agencies. In a disclosure, CEO Paolo Ardoino shared that since 2014, the company has collaborated with more than 145 law enforcement bodies worldwide, resulting in the recovery of approximately $108.8 million worth of USDT tied to illicit activities. Tether has also joined forces with TRM Labs and Tron to set up the T3 Financial Crime Unit. This specialized unit is dedicated to detecting and freezing suspicious transactions involving USDT on the Tron network, demonstrating Tether’s dedication to adhering to regulations and combatting financial crimes within the cryptocurrency sector, as reported by Decrypt.

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2024-09-13 19:39