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Hindenburg research offers $1m for disclosing exclusive Tether information

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  • Hindenburg has accused Tether of lacking transparency in disclosing its backing reserves. The firm says that this secrecy puts Tether’s investors at risk.
  • It isn’t the first time that Tether is facing accusations of irregular dealings. It has also come under fire for alleged market manipulation.

Hindenburg Research announced a one million bounty on information disclosing Tether’s (USDT). backing reserves. The forensic financial researcher has expressed its doubts about the stablecoin’s backing. 

According to Hindenburg, Tether’s secrecy on the matter exposes its investors to risk. This claim follows another by Alex Mashinsky that it was minting new USDT for cryptos. Such minting contravenes Tether’s terms. Mr. Mashinsky is Celsius’ CEO>

Today, Tether stands among the top 10 cryptocurrencies in the market. But, these claims might make it lose credibility within the crypto sector. The forensic financial firm says that it’s vital that Tether discloses its backing.

Now, its users can take advantage of this opportunity to earn a bounty. All they need to do is help the firm dig out the secrets surrounding the Tether stablecoin.

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Hindenburg is a financial firm dedicated to the exploration of financial research. It seeks solutions for major stress points within the financial and crypto space. Its diversified functions enable it to look into different financial aspects include credits, derivatives.

How Hindenburg plays a role in this research

Hindenburg is well-versed in offering the best investment advice. Besides identifying financial irregularities, it tracks financial fraud and illegal monetary connections. Since its start, it has been producing reports on different projects. It also maintains their progression of its platform.

Tether has kept mum on its possible fraudulent activity. It insists that it holds $1 is to every 1USDT on the company’s US dollar traditional reserves. But, it also stated that a good amount of USDT has its backing from US commercial paper. This factor places it at the most-coveted position in the commercial paper market.

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Not its first rodeo

In 2019, Tether found itself facing accusations of market manipulation. Additionally, it faced allegations of not disclosing all USDT risks to its users. It wasn’t alone in this as crypto exchange Bitfinex also found itself in the same scandal. Both companies were lucky after a court ruled against half of the plaintiffs’ claims.

But, New York’s district attorney general ordered an end of their activity in the state. Everyone is trying to understand why Tether finds itself in illegal claims. 

It’s a viable hedge against the volatility connected to other cryptocurrencies. But it isn’t doing enough to bring trust back from its users.

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Tether

Tether FUD: The Mystery Behind $1 Billion USDT Print, Will Bitcoin (BTC) Price Pump?

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The crypto market is going through another bearish phase this month as the top cryptocurrencies lost majority of their gains from October. Bitcoin (BTC) has failed to hold key support of $55,000 and currently trading at $54,777. Amid growing pressure from the bears, Tether’s latest issuance has created another market FUD.

Tether is often accused of printing additional USDT to pump the BTC market. Even though there hasn’t been conclusive evidence for the claims, the controversy around Tether’s reserves only adds fuel to the fire. The latest issuance of $1 billion USDT has created a similar controversy especially given the crypto market is bleeding.

Tether

Tether treasury printed a billion-dollar worth of USDT on November 26, the same day the crypto market fell sharply due to Covid-19 new variant induced fears in the stock market. Infamous crypto Twitter account that goes by the name of Mr. Whale claimed that Tether treasury minted $1 billion out of thin air.

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The controversy also comes at a time when the US federal agencies have demanded more power from Congress to crack down on the stablecoin market. Tether has always been a major concern for the regulators, given its past record with the mismanagement of USDT reserves. The stablecoin issuer was recently fined $41 million by CFTC over misleading claims. However, this wasn’t the first time that Tether has found itself at the receiving end of regulatory agencies.

Earlier in February this year, Tether settled a long-drawn case with the New York Attorney General (NYAG) Office for mismanagement of funds. Tether was fined $18.5 million and barred from offering any service in New York.

Will BTC Price Pump Post Tether Issuance?

Bitcoin’s (BTC) price showed minor recovery earlier today, reaching a daily high of $55,329 before retracing below the $55K support zone again.  The top cryptocurrency has lost more than 20% from its all-time high of $68,789 in October.

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Tether Bitcoin
Source: TradingView

With November turning bearish again, the major price targets of $98K seem to be out of the picture. Plan B, the Bitcoin analyst who popularised the Stock-to-Flow model admitted that BTC is set to miss its first price target of November.

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Tether to work with regulators to address stablecoin concerns

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  • Sen. Sherrod Brown has sent letters to stablecoin issuers and crypto exchanges requesting information on how they are protecting consumers and investors. 
  • Tether in response to the press release issued by Sen. Brown Tether has assured that they would be working with lawmakers to improve the industry.

The recent surge of the crypto market value has called for the need to protect investors through designed regulations. With the majority of the concerns focussing on the highly volatile assets, stablecoins like Tether (USDT) that hold the value and stability of another financial asset have not been spared. In a recent report by the President’s Working Group on Financial Markets, stablecoin was said to pose a huge risk to investors as the unregulated assets are a threat to market integrity and investors’ protection. 

The report highlights that stablecoins may lead to “possible fraud and misconduct in digital asset trading, including market manipulation, insider trading, and front running, as well as a lack of trading or price transparency.”

In response to the concerns highlighted in the report, Sen. Sherrod Brown, Chair of the U.S. Senate Committee on Banking, Housing, and Urban has sent letters to stablecoin issuers and crypto exchanges requesting information on how they are protecting consumers and investors. 

A copy of the letter was sent to Gemini, Paxos, Coinbase, Tetter, Circle, Binance.US, and TrustToken. 

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Sen. Brown wrote in the letter to Circle: 

I have significant concerns with the non-standardized terms applicable to redemption of particular stablecoins, how those terms differ from traditional assets, and how those terms may not be consistent across digital asset trading platforms.

Tether ready to collaborate to meet investors protection standard

Tether in response to the press release issued by Sen. Brown has assured that they would be working with lawmakers to improve the industry.

We appreciate the interest from lawmakers in the function, purpose, and security of all stablecoins across the cryptocurrency ecosystem. We have been and are pleased to work with policymakers around the world on these important issues.

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In early October, the Securities and Exchange Commission (SEC) issued a subpoena of which Circle, the issuer of USD Coin (USDC) pledged to fully cooperate with the regulators. Circle has also hinted that to meet the required accountability standard, it will be working to become more transparent.

Authorities at G20 have also called for the regulation of stablecoins before they are approved for use. Not just that, it was also said the Central Bank Digital Currencies (CBDCs) must be implemented before global stablecoin use. 

Recently, the tech probe launched by the Consumer Financial Protection Bureau (CFPB) included stablecoins. According to Rohit Chopra, the director, stablecoins issued by a big tech firm could see a fast and widespread adoption when it leverages its large user base. SEC Chair Gary Gensler also referred to stablecoins as “Poker Chips” after it was reported that SEC has decided to crack down on the market. 

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Regulators are primarily concerned about the asset backing of stablecoins though it is said to be pegged in the value to the US Dollar. However, the popular stablecoins are actually backed by commercial paper like Tether and US Treasury debt like USD Coin. 

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Tether responds that he will collaborate with the US Senate

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Yesterday we published the news: “US Senate urgently requires data from Tether and other stablecoins”, with the letter sent by the Committee on Banking, Housing and Urban Affairs, translated in full.

Today, Tether’s official profile posted on twitter that:

“We appreciate the interest of policymakers in the function, purpose and security of all stablecoins ​​in the entire cryptocurrency ecosystem. We have worked and are pleased to work with policy makers around the world on these important issues.”

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And they continued:

“It’s critical that we work collaboratively to build this industry. As blockchain technology pioneers and leaders in transparency and innovation, Tether is dedicated to ensuring our customers are properly protected and have the tools they need to succeed.”

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“We look forward to working with stakeholders to develop these structures.” – concluded.

It’s not the first time the US government has made a regulatory move against Tether, and it’s not the first time the company has responded that it intends to collaborate with the authorities.

Both Tether and other stablecoin broadcasters have until December 3rd to officially answer all questions in the November 23rd letter.

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