Is the cryptocurrency market facing an earthquake?

US federal lawyers are investigating whether Tether is hiding from banks that transactions are linked to cryptocurrencies. And Bloomberg Financial News wrote on Monday, citing three people with direct knowledge of the matter. Since the investigation is confidential, they did not want to reveal their names.

So the US Department of Justice’s criminal investigations focus on Tether’s behavior in its early stages for several years, Bloomberg reports. According to one source, state attorneys were sending letters to Tether executives informing them that they were the subject of an investigation. An indictment is due to be issued in the coming weeks.

The indictment will have far-reaching consequences

A possible criminal case could permanently shake confidence in the so-called stablecoin market, which underpins Bitcoin’s liquidity. The investigation comes as the US government is showing a growing interest in controlling cryptocurrencies. For example, US Treasury Secretary Janet Yellen brought Bitcoin regulation into effect in January. Tether told CNBC last week that a review is underway and will be completed within months. However, the company has been promising this for years.

Put the rope as a bridge to the banking system

Tether was created in 2014 as a bridge between traditional banking systems and the emerging crypto market. Tether is a stable currency. 1 rope (USDT) is always equal to 1 US dollar (USD). Today, there are around 62 billion USD in stablecoins in circulation. They are supposed to be backed by an equal amount of cash, debt, corporate bonds, or other assets. This means that there is a US dollar behind every USDT. Investors use the Tether stablecoin to trade bitcoin without having to exchange the cryptocurrency for fiat money, which costs extra time and money. It is estimated that Tether supports more than half of all Bitcoin trades.

More allegations

The company told Bloomerg: “Tether routinely engages in open dialogue with law enforcement agencies, including the judiciary, as part of our commitment to cooperation and transparency.

But in addition to the now-defining criminal investigation, there are allegations that tethers spent much more USDT than they earned in US dollars. Lawsuits filed by cryptocurrency investors in October 2019 allege that Tether is being used to manipulate the price of Bitcoin. Accordingly, USDT will be issued unhedged in US dollars and then used to buy bitcoins on platforms such as Bitfinex. The bitcoins will then be sold for US dollars, and the proceeds will be deposited into accounts that subsequently confirm the dollar coverage. It could mean that Tether is artificially increasing the price of Bitcoin. If the allegations are true, it will have a huge impact on confidence in Bitcoin and the cryptocurrency market in general.

(acn)

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