Tether Stablecoin Growth is a Risk For Crypto, Says JPMorgan Chase

LUCKNOW (CoinChapter.com) — Tether stablecoin holdings have rapidly expanded to over $100 billion recently, representing over 70% of the stablecoin market. However, JPMorgan Chase and other critics see Tether’s meteoric rise as a risk to crypto. According to a report published on Thursday, the lack of transparency and regulatory compliance threatens the crypto market.

Paolo Ardoino, CEO of Tether stablecoin, asserts the company has worked diligently to educate regulators, guide stablecoin policy, and serve market demand.

“Tether’s market domination may be a ‘negative’ for competitors including those in the banking industry wishing for similar success but it’s never been a negative for the markets that need us the most. We’ve always worked closely with global regulators to educate them on the technology and provide guidance on how they must think about it.”

Paolo Ardoino

Tether Stablecoin Firm Reaps Billions in Profits 

According to the company’s latest attestation report, Tether stablecoin firm generated over $6 billion in net profit in 2023, including a record $2.85 billion in Q4. The impressive earnings stem predominantly from interest income tied to Tether’s sizable investments in low-risk US Treasury securities.

Additionally, the Tether stablecoin firm ramped up T-bills and other government debt purchases throughout 2023 to back its reserves for stablecoin USDT. T-bills now account for over $80 billion of Tether’s holdings. At 4.7% yields on 1-year Treasury, this massive portfolio drove interest income over $4 billion last year, per the report.

Tether’s report also detailed billions in other reserve assets like gold and Bitcoin.

Still, some critics argue more transparency is needed around Tether’s finances, given USDT’s systemic importance to crypto markets.

Critics Call for More Clarity on Finances

As a price-stable cryptocurrency backed by reserves, Tether’s USDT provides traders a relatively low volatility way to move between digital assets. Its unparalleled liquidity has made it integral to the crypto market infrastructure. However, questions have long swirled around the credibility of Tether’s claimed 1:1 US dollar reserves.

In 2021, Tether paid a $41 million fine to the CFTC for misleadingly claiming full US dollar backing. And while the company has since issued quarterly attestations of its reserves, details remain scant compared to more transparent competitors.  

Stablecoins face mounting regulatory pressure in major jurisdictions. The Clarity for Payment Stablecoin Act in the US proposes federal oversight of stablecoin issuers. The EU plans a partial rollout of the Markets in Crypto-Assets Regulation (MiCA) in June, which sets standards for stablecoin governance and transparency.

“Stablecoins issuers that have been more aligned with existing regulations are likely to benefit from the coming regulatory crackdown on stablecoins and gain market share”

JPMorgan analysts