Former US Securities and Exchange Commission (SEC) official John Reed Stark urged US financial regulators to block crypto firms from offering Tether USDT, describing the firm as a “giant house of cards”.
In a long-form Twitter post dated May 9, Stark touched on the different issues that helped Tether make its point. According to him, his experience and study of the markets and financial statements over the years has led him to believe that the stablecoin issuer could be the next domino to fall.
Tether operates in a regulatory vacuum
Stark said that Tether has operated without a regulatory hurdle because it has no legal framework to guide its operations in the US.
“Tether’s fundamental business, the essence of everything Tether does, is tied exclusively to Tether’s financial reserves. Yet those reserves are unaudited, unconfirmed, and therefore questionable,” he said.
According to him, this is a red flag as Tether users are left to deal with its “condescending and ineffective public relations blunder, hype and blasphemy”.
Questions about Tether’s certification
Stark criticized Tether’s verification, saying that it cannot replace an audit. According to him, audits are designed to look at potential risks, while verifications only check whether the data presented is accurate for the time being.
“Under any circumstances, a verification is not the same as an audit – and such an ‘unverified snapshot’ will never pass regulatory muster of any kind.”
In addition, stablecoin issuers are no longer legally required to submit verification of their reserves. This means the company cannot submit any further verification, leaving more questions about its reserves.
Meanwhile, Tether released its latest verification report today, showing a net profit of $1.5 billion during the first quarter of the year.
“If Tether’s internal controls are so lacking that instant accounting of its financial reserves – for money – cannot be done with the click of a mouse, that speaks volumes as to Tether’s trustworthiness and credibility. “
Stark further wondered why Tether’s CTO, Paolo Ardonio, constantly discusses the company’s financial situation and not its CFO.
calls for a ban
stark noted Ontario, Canada has banned crypto platforms from offering Tether USDT and urged the US to do the same.
Earlier this year, Crypto.com delisted USDT for Canadians, citing compliance with regulatory demands.
Meanwhile, this is not the first time Tether has faced questions about its reserves and operations. The stablecoin issuer has consistently maintained that its business was managed correctly and poses no risk to any struggling crypto firms.
Despite these issues, Tether’s USDT token remains the largest stablecoin. It has a market cap of $82.53 Billion and a 24-hour volume of $24.18 Billion.