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Brad Garlinghouse recently shared his concerns on the "World Class" podcast about potential U.S. regulatory actions against Tether. He also touched on the major repercussions this would have on the crypto market. Despite this, Tether is expanding its presence in the Eastern European crypto market by increasing its investment in CityPay.io, a Georgia-based crypto payment provider. There are also some global advancements in stablecoin technology, like the Philippines testing a peso-backed stablecoin and Lightning Labs integrating stablecoins into the Bitcoin network using the Taproot upgrade.
US Government Targeting Tether
Brad Garlinghouse, the CEO of Ripple, shared some of his concerns on the "World Class'' podcast about potential regulatory actions against Tether by the U.S. government. He also suggested that these actions could have a major impact on the cryptocurrency market. Garlinghouse did not specify the nature of these potential actions but emphasized Tether's crucial role in the crypto ecosystem.
Garlinghouse said on the podcast that there would “100%” be another crypto-related black swan event like the collapse of FTX. “The U.S. government is going after Tether, that is clear to me,” he said without elaborating more on this. He actually stopped short of suggesting any possible U.S. action against Tether would be the next black swan event, but he did say it is an “interesting one to watch.”
The discussion came up as Ripple prepares to launch its own U.S. dollar stablecoin in 2024. According to Ripple CTO David Schwartz, the stablecoin will be backed by dollar deposits and short-term government securities.
Tether, under its parent company Tether Holdings, is the largest stablecoin issuer by market capitalization and has faced a lot of allegations over the years. In 2021, Tether settled with the Commodity Futures Trading Commission for $41 million after being accused of misrepresenting the reserve holdings that backed its USDT tokens. Additionally, U.S. authorities have been investigating Tether since at least 2022 for potential misconduct, including the alleged concealment of transactions linked to cryptocurrencies.
U.S. politicians have also raised concerns about Tether's operations, with some even suggesting the company may have been involved in activities that could support terrorism. Tether responded to these allegations by pointing out its commitment to cooperating with global law enforcement agencies.
Tether Boosts Investment in Eastern European Crypto Market
Despite the fact that Tether is actively being targeted by US authorities and Senators, the stablecoin company is expanding its investment in the Eastern European crypto market by funding CityPay.io, a Georgia-based crypto payment provider. This follows Tether's initial investment in 2023 after committing to boost crypto use in the region.
CityPay.io allows people to pay for services like Wendy’s and Radisson Hotels with cryptocurrencies like Bitcoin. With Tether's additional investment that was announced on May 8, CityPay.io now plans to expand its services across Eastern Europe, targeting countries like Georgia, Armenia, Azerbaijan, Kazakhstan, and Uzbekistan.
Currently, CityPay.io operates in over 600 locations in Georgia and is developing its own e-wallet and card solutions, which are expected to launch within the next two years. The company also has very ambitious plans to establish more than 500,000 crypto payment points throughout its target markets.
Tether's CEO, Paolo Ardoino, believes that the initial collaboration with CityPay.io already greatly improved crypto accessibility in Georgia. He now hopes that the new investment will further disrupt traditional payment systems. CityPay.io integrated with Tether for payments using the Polygon network in October of 2023, and the two companies seem excited to extend their working partnership into the future.
Georgia's government is also playing a big role in creating a more crypto-friendly environment. Georgia signed a memorandum of understanding with Tether in June of 2023 to develop Bitcoin and peer-to-peer infrastructure. The country is now working towards positioning itself as a global crypto hub, supported by the presence of other major firms like Binance and an extensive network of Bitcoin ATMs.
What Exactly is a Stablecoin?
Stablecoins are a type of cryptocurrency that is designed to minimize the volatility often associated with digital currencies like Bitcoin. They do this by pegging their value to other stable assets like fiat currencies, commodities, or financial instruments. This linkage helps stablecoins maintain a consistent value, making them more suitable for everyday transactions when compared to more volatile cryptocurrencies.
The importance of stablecoins stems from the erratic nature of popular cryptocurrencies like Bitcoin, which can experience large price fluctuations in very short periods. This volatility can be very beneficial for traders but poses risks for ordinary transactions, where both buyers and sellers are looking for price stability to preserve value.
By offering a more stable alternative, stablecoins cater to users looking for more reliable mediums of exchange in the digital economy. They are particularly crucial for businesses and consumers who want to use cryptocurrencies without the risk of drastic price changes affecting their spending power or investment value shortly after a transaction. This stability helps bridge the gap between traditional fiat currencies and cryptocurrencies by providing a less volatile digital currency option.
Philippines' Peso-Backed Stablecoin Enters Pilot Phase
Although stablecoins are facing some legal and regulatory hurdles in the U.S., it seems like the Philippines is embracing the technology. The Bangko Sentral ng Pilipinas (BSP) approved a pilot project for a Philippine Peso-backed stablecoin, PHPC, in collaboration with crypto wallet provider Coins.ph. The grant was approved under BSP’s Regulatory Sandbox Framework.
Coins.ph will hold cash reserves in pesos equivalent to the circulating supply of the PHPC stablecoin in the controlled sandbox environment. The peg to the local currency will make it easy to seamlessly convert back to physical pesos.
The pilot project will test the stablecoin’s performance in real-world scenarios and its impact on the existing fiat ecosystem. Some of the potential applications for PHPC include domestic and cross-border payments, trading with other digital assets, hedging against market volatility, and serving as collateral in decentralized finance (DeFi) applications.
The duration of the sandbox testing could range from three to twelve months, depending on the complexity of the project. While a formal public rollout will require final evaluations and approvals from the BSP, this is still a big step towards integrating digital currencies into the Philippine financial landscape.
This move is very similar to an initiative from UnionBank, which launched its own peso-backed stablecoin, PHX, in July of 2019.
Stablecoins on Bitcoin
At the Crypto and Digital Assets Summit hosted by FT Live in London, Elizabeth Stark, the CEO of Lightning Labs, revealed some interesting advancements when it comes to integrating stablecoins and other tokenized assets into the Bitcoin network by using the recent Taproot upgrade. Stark also talked about how the development team at Lightning Labs launched an early version of the code and successfully demonstrated the first transaction of an asset over the Lightning Network.
The Taproot assets protocol spearheaded by Lightning Labs plans to address the high fees and other issues that are associated with digital assets on other blockchains. Stark believes in Bitcoin's robust security and decentralization and sees it as ideal for facilitating stablecoins. She also made sure to point out the increased adoption of stablecoins, especially in emerging markets where they serve as a reliable store of value amidst economic volatility.
The Lightning Labs CEO shed some light on the low transaction costs possible through the Lightning Network, comparing favorably to traditional financial systems like Visa, which can charge fees up to 3%. This development promises more accessible global transactions at significantly reduced rates, boosting the potential of Bitcoin and the Lightning Network to revolutionize financial interactions with stablecoins and tokenized assets.