Hedge funds’ Tether attention trigger calls for transparency. According to a report that some hedge fund firms are shorting Tether, the world’s third-most traded token. The market analyst argues Regulators need to step up scrutiny on Tether amid fresh turbulence hitting the crypto industry.
Tether (USDT) is a stablecoin, meaning it is pegged to a currency, in this case, the U.S. dollar. Stablecoins’ name highlights the idea that the peg supposedly makes them less volatile than cryptocurrencies such as Bitcoin or Ether, which can vary widely in value.
When a stablecoin is established, there is a reserve for the assets, which are held as collateral.
Following weeks of turmoil in crypto, there’s now another matter on the horizon: the reports that some hedge funds are shorting Tether, the $66 billion stablecoin.
If true, it suggests that they are hoping to cash in on bets of issues with the token. It signals that they believe recent turbulence in the market could drag Tether’s value below its flagged-up 1-to-1 exchange with the U.S. dollar.
The analysis from deVere Group’s Nigel Green that this scenario would be extremely damaging to the wider digital assets ecosystem.
How Tether is backed remains a mystery – there are no undisclosed audits. But due to its promise of 1-to-1 with the dollar, it should have at least $66 billion in reserves to support the coin.
Nigel Green emphasized "With all the recent drama in the crypto market, we urgently need greater transparency" also "I am calling on Tether to reveal the extent of their holdings to finally put to bed the speculation, which drives fear, uncertainty and doubt.”
He is also calling for greater regulatory scrutiny of the token and the wider industry.
“The U.S. Commodity Futures Trading Commission (CFTC) stated in its recent court filing against FTX founder Sam Bankman-Fried that digital assets like Tether are commodities. As such, they have the authority to ramp up their oversight on the token.”
What’s needed is a strong regulatory framework to be established and approved at an international level.
Such regulation will help protect investors, tackle cryptocurrency criminality, and reduce the possibility of disrupting global financial stability, as well as offering a potential long-term economic boost to those countries which introduce it.
Nearly all foreign exchange transactions go through banks or currency houses and this is what needs to happen with cryptocurrencies. When flows run through regulated exchanges, it will be much easier to tackle potential wrongdoing, such as money laundering, and make sure tax is paid.
As recent events underscore, greater transparency and regulation is urgently needed in the industry if the crypto ecosystem is to thrive and fulfill its massive potential.
