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Stablecoin Tether (USDT) and crypto exchange Bitfinex have reached a settlement with the New York State Attorney General.
The agreement requires Tether and Bitfinex to cease any further trading activity with New Yorkers, as well as pay $18.5 million in penalties, in addition to requiring a number of steps to increase transparency, according to an announcement from the Office of the Attorney General (AGO).
“This resolution makes clear that those trading virtual currencies in New York state who think they can avoid our laws cannot and will not,” said New York State Attorney General Letitia James.
Tether (USDT) Settlement Details
The settlement comes after an investigation by the OAG found that iFinex, the operator of Bitfinex, and Tether made false statements about the backing of the “tether” stablecoin, and about the movement of hundreds of millions of dollars between the two companies. According to the OAG, on November 2, 2018, Tether transferred hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s.
According to an announcement from Tether, the settlement resolves allegations about public disclosures related to a loan Tether made to Bitfinex when the exchange was encountering challenges accessing approximately $850 million in funds held by a payment processor in 2018. This loan had been made to ensure continuity for Bitfinex’s customers, and has since been repaid in full, including interest, Tether said.
Tether announced in a tweet:
“Under the terms of the settlement, we admit no wrongdoing, the settlement amount we have agreed to pay to the Attorney General’s Office should be viewed as a measure of our desire to put this matter behind us and focus on our business”
Growing List of Issues
These are not the only issues that have been raised by Tether’s growing prominence. Last year, the STABLE Act was introduced in the U.S. Congress, which, if enacted, could be devastating for Tether and other stablecoins.
The act calls for banking licenses for stablecoin issuers such as USDT. It proposes additional requirements for Federal Reserve reporting. It also proposes issuance approval in addition to ongoing auditing requirements and an insurance policy to cover assets.
Another proposal may require stablecoin issuers to store their reserves directly at the Federal Reserve. This puts them under control of the central bank and severely limits their open usage.