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In a controversial interaction, Tether, a leading stablecoin operator, vehemently criticized Deutsche Bank following the release of a report that cast doubt on the viability of stablecoins, including Tether's own USDT . The report, dated May 7, speculates on the possibility of a destabilizing “peso moment” similar to the 2022 implosion of Terraform Lab's TerraUSD (TUSD), which erased approximately $40 billion from the market in just a few days .
Analysis of stability and transparency issues in Tether operations highlighted by Deutsche Bank report
Deutsche Bank's analysis, which examined 334 pegged currencies over the past 223 years, determined that nearly half of those pegged currencies went bankrupt during their median lifespan of eight to 10 years. This historical perspective has led Deutsche Bank analysts to predict considerable volatility and possible deindexing incidents within the market. cryptocurrencyand stablecoin sector. Analysts have pointed to the general lack of transparency and susceptibility to speculative moves as key factors that could lead to the failure of many stablecoins.
Additionally, the bank specifically targeted Attached, highlighting a “questionable” solvency status and opaque management of its reserve disclosures. In response, Tether released a statement attacking the credibility of the report, criticizing it for its lack of concrete data and reliance on “vague claims.” The stablecoin company also dismissed the comparison to TerraUSD as “misleading and irrelevant,” given that Terra was an algorithmic stablecoin, unlike Tether, which is backed by reserves.
Tensions Heighten Over Stablecoin Viability and Financial Transparency
The Tether spokesperson responded that German Bank's criticism seemed ironic, particularly given the bank's history of regulatory fines and penalties, which could be seen as undermining its authority to assess others in the financial industry. Despite criticism of its transparency, Tether has provided several financial certifications indicating that it maintains more than $110 billion in fiat currency reserves, although these certifications are not equivalent to a full financial audit. Financial audits dig deeper into previously undisclosed data, risks and compliance issues, whereas an attestation only captures a snapshot of certain data points.
Scrutiny over Tether's reserve transparency has been a long-standing issue. In 2021, a settlement required Tether to pay an $18.5 million fine and banned it from operating in New York, following allegations that it misrepresented the amount of its collateral-backed reserves trustees. Despite this, Howard Lutnick, CEO of Cantor Fitzgerald, expressed confidence in Tether's financial situation, stating his belief that the company indeed has the necessary funds.
Through this dispute, fundamental concerns regarding the stability and transparency of the stablecoin market continue to be highlighted, drawing attention to the delicate balance between cryptocurrency innovation and the need for regulatory oversight and clear financial practices.
“Deutsche Bank's history of fines and penalties raises doubts about its own ability to criticize others in the industry. DB has also been named the world's riskiest bank by the International Monetary Fund.”
Tether criticizes Deutsche Bank for suggesting its stablecoin could fail…
– Paolo Ardoino 🍐 (@paoloardoino) May 10, 2024
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