A US Senator has written a letter to Tether calling for greater transparency about how the stablecoin works.
Tether, a crypto token pegged to the price of the US dollar, has come under scrutiny because of concerns about the whereabouts of some $73bn in investor funds which back up the value of digital USDT tokens.
Now US senator Sherrod Brown has called on the company behind USDT to detail the process through which the coin is minted and redeemed for dollars in a draft letter leaked online.
Brown wrote “consumers’ increased use of stablecoins, and their importance in effecting transactions in digital assets, underscores the need for greater understanding of the basic operation, and limitations, of Tether.”
He noted that President Biden’s financial markets working group had already determined “stablecoins present investor protection risks and raise several market integrity concerns.”
Tether has long been plagued with questions about the location of its reserve funds.
The company’s whitepaper claims that it maintains a 1-1 reserve ratio between fiat given and tokens issued. This would make Tether, which secures $76bn of user deposits, one of the 50 largest banks in the United States – if it were a licensed bank that is.
Tether was ordered to report on the location of its reserves on a quarterly basis by a New York court after it was sued for lending out investor funds to crypto businesses and allegedly trying to conceal losses.
Tether agreed to pay $18.5m to settle the suit after it was accused of covering up $850m of losses in partnership with Bitfinex. The company’s latest set of financials claimed that Tether stores $30bn in Commercial Paper and $15bn in Treasury Bills.
Brown, who chairs the Senate Banking Committee, demanded that Tether respond to his queries by a deadline of 03 December.