What Tether Means When It Says Its Regulated

Wednesday 27 January 2021, 3:05 AM AEST - 1 month ago

A screenshot from Laura Shin's interview with Deltec Deputy CEO Gregory Pepin, Tether's banker.

Tether, regulated or not?

Newcomers to the crypto space are quickly confronted with a popular distinction between regulated stablecoins and unregulated stablecoins. But what is the difference? Tether, the largest of the stablecoins, is often described as unregulated. But Tether executives and supporters disagree with this claim. Who is right?

J.P. Koning, a CoinDesk columnist, worked as an equity researcher at a Canadian brokerage firm and a financial writer at a large Canadian bank. He runs the popular Moneyness blog.

Tether is the most popular medium of exchange in the crypto economy. With almost $25 billion worth of U.S. dollar tether stablecoins in existence, it has become one of the worlds largest non-bank issuers of dollars. For context, there are around $32.5 billion worth of PayPal balances outstanding. It took PayPal 20+ years to get to this level. Tether did it in just six!

Tethers story is even more intriguing as it has been dogged for years by speculation that its reserves are deficient. In fact, New York Attorney General Letitia James is currently investigating Bitfinex, a Tether affiliate, for allegedly violating New ‎York securities law by using Tether reserves to cover up losses.

For potential users of stablecoins, its easy to be confused by these mixed signals. Tethers incredible growth implies a high degree of market confidence in the stablecoin, yet persistent rumors about its reserves say the opposite.

One of the rules of thumb that anyone can use for establishing trust in a financial institution is the presence of regulation. Is there a neutral government body that supervises or regulates a financial institutions finances? If so, that provides users with a layer of protection.

Unfortunately, even the topic of regulation can be confusing. Podcaster Laura Shin recently had a conversation with Deltec Deputy CEO Gregory Pepin, Tethers banker. Pepin was addressing recent accusations th ...

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