Tether has been facing a lot of pressure from regulatory authorities. Now, the attention of the watchdogs has shifted to its commercial paper reserve. As a result, this week has been very hot for the company. The regulators focus their attention on what makes up the Tether reserves.
A report disclosed that Tether’s Michael Hsu said that the US regulators focus their attention on the paper to know if every Tether Token is actually backed by $1 as the company claims.
US Regulators Scrutinize Tether
From what we learned, the regulators investigating Tether are led by Janet Yellen, the US Treasury Secretary. Before now, Yellen has held some meetings about the possible risks of stablecoins.
Now, the ” President’s Working Group on Financial Market” aims to know if Tether really holds large amounts of commercial papers as it claims. Commercial papers usually represent debt instruments that companies issue to investors for short-term funds.
However, the Working Group does not believe the claims as it compares it to a mutual fund that can lose its investors in one day. Presently, the total USDT in circulation is 62 billion. So, there seems to be a legitimate cause for alarm.
Last two months, Tether had revealed the composition of its total reserves. According to the stablecoin, it had more instruments that were not just cash or cash equivalents, such as bonds, secured loans, bitcoin, and a larger portion comprising of commercial papers.
While talking with sources, Stuart Hoegner, the Tether general counsel, revealed that the company is planning a thorough audit in some months to come. Let’s recall that Tether hasn’t carried out such audits before now, and the announcement helped a lot of investors to breathe easier.
However, on July 19, Yellen was heard asking lawmakers to establish rules that will guide stablecoins in the financial market.
More Calls on Crypto regulations
After calling for regulations on stablecoins, Yellen received a letter nine days later from Senator Elizabeth Warren asking her to push for greater regulation for the cryptocurrency industry as a whole.
During a hearing of the “Senate Banking Committee,” Warren also stated her negative position about the crypto industry. According to her, it was better to hand over the financial systems to giants banks than some nameless and faceless, shadowy miners and super-coders.
However, during the hearing, an Anderson Kill Law partner, Preston Byrne, stated that the most frightening of all is that Elizabeth Warren is in control of the financial system. Elizabeth is a democrat who has been serving as a United States Senator since 2013.