thecoinrise.com
Ripple CEO Brad Garlinghouse recently highlighted concerns over the United States government’s scrutiny of stablecoin issuer Tether, suggesting it could have unpredictable consequences for the cryptocurrency markets.
In a podcast episode of World Class on May 10, Garlinghouse expressed a conviction that regulatory action against Tether was imminent, likening it to a “black swan” event that could shake the crypto industry.
Ripple CEO Warns Investors
The Ripple CEO’s assertion stems from his belief that US authorities are intensifying their focus on Tether, the issuer behind the world’s largest stablecoin by market capitalization, USDT.
While he refrained from explicitly labeling potential US action against Tether as the next black swan event, he emphasized its significance as an issue to monitor closely.
“The US Government is going after Tether (USDT issuer). That is clear to me. I view Tether as a very important part of the ecosystem and I don’t know how to predict the impact it would have on the rest of the ecosystem,” said the Ripple chief executive.
Ripple to Debut Stablecoin
Despite acknowledging Tether’s importance within the crypto ecosystem, Garlinghouse admitted uncertainty regarding the ramifications of regulatory intervention on Tether.
Ripple itself is gearing up to launch its own stablecoin later this year, adding another layer of complexity to the regulatory landscape. The firm’s decision to launch its stablecoin later this year adds another layer of complexity to the situation.
David Schwartz, the Chief Technology Officer at Ripple, outlined plans to back their stablecoin with a combination of dollar deposits, short-term government Treasurys, and other cash equivalents, aiming to enhance transparency and compliance.
It is important to note that Garlinghouse has been very outspoken against the recent actions taken by the United States Securities and Exchange Commission (SEC) against crypto firms and the digital asset ecosystem.
Tether and US Authorities
Tether Holdings Limited, the parent company overseeing the issuance and management of USDT, has faced increasing scrutiny from US authorities.
Last October, Senator Cynthia Lummis and Representative French Hill urged the Department of Justice to assess Tether’s potential involvement in supporting terrorism.
In response, Tether emphasized its cooperation with law enforcement and commitment to global regulatory compliance. However, reports have suggested ongoing investigations into Tether’s handling of crypto-linked funds, particularly regarding alleged concealment from banks.
Lack of Transparency
Tether’s lack of transparency regarding its reserve holdings has further fueled regulatory concerns. In 2021, the company paid a $41 million fine to the Commodity Futures Trading Commission for misrepresenting its reserves, casting doubt on its backing of USDT.
As regulatory scrutiny intensifies, the crypto industry faces heightened uncertainty. The Ripple executive’s warning underscores the potential impact of regulatory actions against Tether, emphasizing the need for increased transparency and compliance standards across the stablecoin sector.