Ripple Labs Chief Executive Suggests US Government Pursuing Tether

Ripple Labs chief Brad Garlinghouse acknowledged that Tether is a critical constituent of the crypto ecosystem and that its fate in the US regulatory agencies is fascinating to watch. The executive lamented that the US government was pursuing stablecoin issuer Tether in a move that could yield an unpredictable consequence on the crypto markets. 

Garlinghouse predicted during his Friday, May 10 appearance on the World Class podcast the likely emergence of crypto-related black swan. He illustrated that the crypto space would witness an event similar to the 2022 collapse and fraud orchestrated by the FTX executives. 

Regulatory Action on Tether to Plunge Crypto into Crisis

Garlinghouse indicated that the US regulatory agencies are going after USDT stablecoin issuer Tether. He suggested that a possible enforcement action against Tether would constitute the black swan that would plunge the crypto industry into crisis. 

The Ripple boss admitted difficulty predicting a regulatory action’s exact impact on the cryptocurrency ecosystem. The comments by Garlinghouse coincide with the revelation that Ripple Labs is planning to unveil stablecoin this year. 

Tether Holdings is the parent entity of subsidiaries incorporated worldwide and running operations involving issuing and managing USDT stablecoin. Garlinghouse’s comments are unsurprising given that USDT is the global largest stablecoin by market capitalization of $110.8 billion, per CoinGecko.

Tether Under Scrutiny for Facilitating Terrorism

US Senator Cynthia Lummis, alongside Representative French Hill, petitioned the Department of Justice in October last year to scrutinize the extent to which Tether and crypto exchange Binance facilitated terrorism through material support. 

Tether responded to the legislators’ letter, illustrating that it always assists law enforcement and fully commits to working with global authorities. 

A review of past events features the November 2022 publication by Bloomberg. New York attorney Damian Williams assumed the Justice Department’s investigation into Tether for allegedly concealing crypto-linked funds. The transactions involved banks Tether leveraged to move cash.  

Tether has faced scrutiny from parties questioning the absence of transparency regarding the USDT stablecoin reserves. Tether has, in recent years, maintained quarterly publication of third-party audits.  

In October 2021, Tether settled a $41 million fine imposed by the Commodity Futures Trading Commission (CFTC) for misrepresenting the reserve holdings.

The CFTC observed that Tether misled the customers that it held sufficient reserves in fiat to back USDT stablecoin. The CFTC proved that Tether backed the USDT for “only 27.6% of days starting 2016 to February 2019.

The declaration of Ripple Labs chief that Tether is facing an onslaught from the US government coincides with the XRP issuer later this year. Ripple Labs chief technology executive David Schwartz informed the media that it would support tokens with dollar reserves, short-term government Treasuries and cash equivalents.