Tether USDT’s market capitalization is currently over $119 billion, accounting for over 75% of the stablecoin market.
However, Tether’s lack of third-party audits has raised investor concerns about Tether’s transparency and business structure. Many believe that Tether could face another crypto market collapse like FTX.
Those concerns deepened after Consumers Research warned that what it called USDT dollar reserves lacked a full audit.
Tether’s lack of independent audit raises concerns about possible collapse
Cryptocurrency investors and analysts have expressed concerns about Tether, the issuer of the leading stablecoin USDT. Many are concerned about the company’s lack of independent auditing and overall business structure.
Growing doubts about the project have led some observers to believe that Tether is another FTX-like scam.
In a series of X posts, Cyber Capital founder Justin Bonds called attention to Tether’s lack of proof of $118 billion in collateral. He expressed concern that Tether could pose risks beyond the collapse of FTX.
2/17) The possibility of collapse here is greater than Terra Luna!
One of the biggest existential threats to cryptocurrencies as a whole
You have to trust that they are holding $118 billion in collateral without proof.
Even after the CFTC fined Tether in 2021 for lying about its reserves… pic.twitter.com/KoJFbyjRj1
— Justin Bons (@Justin_Bons) September 14, 2024
He reiterated the company’s 2021 CFTC fine for manipulating reserve records. Cryptocurrency researchers also pointed out that Tether poses a major threat of sudden collapse of the industry.
Mr. Bong said of Tether USDT: “The chance of collapse here is greater than Terra Luna. This poses one of the biggest existential threats to cryptocurrencies as a whole. They hold $118 billion in collateral without proof. You have to believe! Even after the CFTC fined Tether for lying about its reserves in 2021.”
Bonds also spoke about Tether’s transparency and business structure. He noted that while Tether has published audit reports through its partnership with BDO, it has not yet published a reserve report submitted to an independent audit for verification.
Within the cryptocurrency community, there is growing concern over Tether’s growing dominance.
According to data from CoinMarketCap, Tether USDT currently accounts for over 75% of the stablecoin market. Additionally, USDT has recorded over 20% increase in market valuation over the past two years.
These concerns stem from the 2022 FTX implosion, which caused huge losses for investors. Its growing dominance has raised concerns that it could incur huge losses if it faces a liquidity crisis like FTX.
Hypothetical driving force for tether collapse
Meanwhile, experts compared the hypothetical Tether collapse to FTX’s liquidity squeeze. FTX failed because it failed to provide $6 billion in liquidity for users to withdraw within three days.
However, IDA Finance co-founder Sean Lee theorizes that Tether’s failure was due to its bank relationships and structural dependence on the underlying assets. Lee spoke about this option in an exclusive interview with Cointelegraph.
“Bear market or not, the likelihood of Tether collapsing is more a matter of its underlying assets and structural ties to bank rails than market movements,” Lee said. .
Lee also compared USDT to Washington Mutual Bank for their stability in processing more than $16 billion in withdrawals within a specified period. While Tether successfully made it to May 2022 within 10 days without any issues, Washington Mutual Bank could not withstand the same pressure and collapsed in September 2008.
Despite growing concerns about Tether’s potential collapse, some remain positive about the project. Andy Liang, an author and intergovernmental blockchain expert, believes Tether is too big to face implosion. However, he noted that the cryptocurrency space faces further threats from large centralized exchanges and platforms.
Mr. Lian explained that cryptocurrencies have the inherent property of functioning without central control, ensuring security, transparency, and user autonomy. Therefore, he pointed out that Tether, as a centralized issuer, could use its huge trading volume and liquidity to influence the crypto market.
