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Tether (USDT) is a cryptocurrency stablecoin pegged to the U.S. dollar and it is backed by reserves held by its parent company, iFinex. This Hong Kong based company also owns the crypto exchange BitFinex.
Tether provides a less volatile option for investors seeking to keep their funds within the cryptocurrency ecosystem. However, Tether’s transparency has been a subject of criticism, and in 2021, its parent company faced significant fines totaling nearly $60 million due to alleged mishandling and misrepresentation of its reserves.
In response to concerns about Tether’s transparency, the CEO of Binance has expressed disapproval and announced plans to introduce more stablecoins on the Binance platform as rivals to USDT.
CZ Plans to Expand Stablecoin Offerings On Binance
Changpeng Zhao, also known as CZ, the CEO of Binance, has revealed plans to add more stablecoins on the platform. Recently, on July 26, 2023, the exchange listed a new stablecoin called First Digital USD (FDUSD), and CZ mentioned that another stablecoin based on the US Dollar will be added soon.
CZ expressed concerns about the lack of transparency in the financial records of USDT, the largest USD stablecoin. Despite its significant market capitalization, USDT has not provided an audit report, leading to uncertainty and risk surrounding it. CZ likened it to a black box. He stated that the partnership with Paxos aimed to address the same issue. Notably, in February 2023, the New York Department of Financial Services had ordered Paxos to halt the creation of more units of the dollar-pegged stablecoin BUSD.
He said, “We are supporting multiple stablecoins given that the BUSD minting has been stopped in relation to the Paxos partnership. We are working with multiple other partners in different regions now to support the idea of further decentralization.”
Binance to Launch its Own Stablecoin
In addition to introducing more stablecoins to Binance, CZ has disclosed the exchange’s plans to develop an algorithmic stablecoin. He emphasized the importance of diversifying investments in stablecoins, considering the regulatory risks associated with them. CZ believes this approach will allow Binance to navigate the challenges posed by regulations and identify which stablecoins can withstand such scrutiny. He also highlighted the significance of transparency in financial records for stablecoin issuers, to build trust and avoid risks.
Meanwhile, Tether’s latest quarterly report revealed a substantial increase of $850 million in excess reserves. The report stated that the consolidated assets exceed the consolidated liabilities of the company.