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Research: These two firms dominate the entire Tether (USDT) flow

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  • The number of USDT stablecoin that Tether released in the market has jumped by 72x in the last four years.
  • A majority of the issuance happened over the last two years dominated by Alameda Research and Cumberland Global.

As the cryptocurrency market continues to expand, stablecoin Tether (USDT) has made a special place for itself. It has been one of the industry’s go-to digital assets to form a bridge between fiat currencies like the USD and decentralized digital assets.

Protos, an independent crypto outlet has done in-depth research into Tether along with other liquidity providers who supply this stablecoin to other crypto exchanges. Over the last four years, Tether’s USDT market cap has shot up from about $1 billion to over $73 billion as of date.

However, there’s always been some suspicion regarding who is buying so much Tether from its parent company Bitfinex. As per the research by Protos, only two companies – Alameda Research and Cumberland Global – accounts for two-thirds of all USDT in the crypto ecosystem. The research report reads:

Together, Alameda and Cumberland received at least $60.3 billion in USDT across the time period analyzed, equal to around 55% of all outbound volume — ever. $49.2 billion (71%) of Alameda and Cumberland’s USDT was acquired in the past year alone, equal to about 60% of all Tether issued in that time.

As per the Protos research, Alamada Research led by FTX exchange founder Sam Bankman-Fried acquired a total of $36.7 billion USDT and a third of all Tether produced. Interestingly, of this total value received by Alameda Research, 86% or $31 billion came just over the last year. This is an equivalent of 37 percent of the total outbound USDT volume.

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Cumberland, which is also the world’s largest liquidity provider comes second receiving $23.7 billion. Cumberland, a subsidiary of DRW Holdings is one of the world’s biggest financial traders.

The Outflow of USDT From Tether’s Treasury

As per the report, Tether has sent more than $30.1 billion (87%) of Alameda’s USDT to its crypto and derivatives exchange FTX. But Alameda Research also has wallets on a variety of different crypto exchanges. As a result, the company received $2.1 billion worth USDT on Binance, another $1.7 billion on Huobi, and $115 million on OKEx. The rest of $705 million went to non-exchange addresses.

On the other hand, Cumberland received a total of $23.7 billion in USDT. Over the last year itself, Cumberland received $17.6 billion in USDT from the Tether’s Treasury. This accounts for 22 percent of all the outbound USDT volume ever recorded.

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Besides, Protos further explains Cumberland’s importance as a market maker and liquidity provider for crypto exchange Binance. The liquidity provider has been on the exchange since early 2019. Since then, Tether has issued Cumberland $18.7 billion (79 percent) in USDT to Binance. The rest went to other exchange platforms.

Tether is still the world’s largest stablecoin crypto by market. However, the company has been under major scrutiny by regulators. There have been allegations that Tether doesn’t have enough physical USD backing the number of USDT in the market.

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Tether

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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Senate Banking Committee Wants Clarity on Stablecoins: Sends Letters to Tether, Coinbase, Circle

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US authorities continue to push for stablecoin clarity by sending letters to several such issuers, including Circle, Coinbaes, and Tether.

Senator Sherrod Brown appears to be keen on understanding how the process of stablecoin minting and redemption actually work. A comprehensive regulatory regime for stablecoin is the need of the hour, a failure to roll out one will prompt the watchdogs to step in.

The head of the US Senate Banking Committee has called upon stablecoin issuers and platforms to disclose their process. Sen. Sherrod Brown (D-OH), Chair of the Senate Banking, Housing, and Urban Affairs Committee, has sent letters to Coinbase, Gemini, Paxos, TrustToken, Binance.US, and Centre, seeking information on what steps these companies are taking towards consumer and investor protection.

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Stablecoin Risks Concerns

For the most part, the United States has been a trendsetter when it comes to embracing new technological advancement and innovation. However, the regulators are yet to apply a similar approach towards cryptocurrencies and specifically stablecoins.

Several high-profile authority figures have highlighted stablecoins as a substantial threat to the global financial system, time and again. But this time, Senator Sherrod Brown is keen on understanding the workings behind stablecoins and the risks they pose.

In his letter to the payment technology company, Circle, the Senator stated,

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

Policymakers’ Escalating Effort on Understanding Stablecoin

He also asked CEO Jeremy Allaire to clarify the essential operational features of the USDC stablecoin. These include the basic purchase, exchange, or minting process, redeeming of USDC, and receiving USD, requirements, or limits (if any), including any minimum redemption size, waiting period, or qualifications.

Questions about USDC issuance and circulation were also mentioned, among others. Brown set December 3 as the last date for the digital asset company to respond.

While emphasizing the rapidly ballooning size of the stablecoin sector, Brown acknowledged the need for better understanding and clarity on how these assets function and their potential risks. The Senator referenced the stablecoin report compiled by the President’s Working Group (PWG), published earlier this month.

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The highly anticipated report in question was released by a group of regulators in the US that urged the lawmakers to take subject stablecoin-based companies to similar stringent federal oversight as traditional financial institutions such as banks.

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