On Friday, the United States Commodity Futures Trading Commission (CFTC), fined Tether and Bitfinex $41 million and $1.5 million, respectively, stating violations of the Commodity Exchange Act (CEA) and of a prior CFTC order.
The U.S regulator found that Tether, the company behind USDT, largest stablecoin pegged to the U.S Dollar, with a market capitalization of approximately $69 billion and the most controversial in recent months, has only held sufficient fiat reserves to back the dollar-pegged asset for 27.6% of time during the 26-month period under review between 2016 and 2018.
The agency also stated that Tether violated the law by holding part of the reserves in non-fiat financial instruments, as well as by blending operational and reserve funds.
What they are saying
In a simultaneous action, the commodity futures watchdog settled charges with Bitfinex for facilitating “illegal, off-exchange retail commodity transactions in digital assets with U.S persons” on its platform, in addition to operating “as a futures commission merchant (FCM), without registering as required.”
In a concurring statement, CFTC Commissioner Dawn Stump backed the action while also expressing concerns that the settlement could “provide users of stablecoins with a false sense of comfort” as they may falsely conclude that CFTC regulates stablecoins and oversees their issuers.
While the CFTC has applied a broad definition of a “commodity” to stablecoins in the present case, Dawn Stump distanced the Commission from regulating this asset class and having “daily insight into the businesses of those who issue” stablecoins.
Tether has hit back, issuing a rebuttal statement, insisting that it, “maintained adequate reserves” at all times. The firm explained its decision to settle by its willingness to “resolve this matter in order to move forward and focus on the future.”
The statement from Tether concluded, “This inquiry arose during a markedly different time in our ecosystem and focused on the same types of challenges that many in our industry faced at the time. As many companies around the world do, Tether agreed to resolve this matter in order to move forward and focus on the future. We are grateful that the market has consistently demonstrated its trust and confidence in Tether.”
Tether is still pegged 1:1 to the U.S Dollar, as of the time of this writing.