Tether Business Structure, Transparency, And 75% Stablecoin Market Dominance Raise FTX-Like Concerns

Tether USDT now has a market cap exceeding $119 billion,representing over 75% of the stablecoin market.

However, Tether's failure to provide third-party audits has sparked investor concerns about its transparency and business structure. Many people believe Tether could face another FTX-like crypto market collapse.

These concerns deepened following Consumers' Research's warnings about lacking a full audit of its purported USDT dollar reserves.

Tether's Lack Of Independent Audits Raises Concerns Of Possible Collapse

Crypto investors and analysts have indicated concerns over Tether, the issuer of the leading stablecoin USDT. Many worry about the company's lack of independent audits and overall business structure.

The increasing doubts about the project make some observers believe Tether is another FTX-like fraud.

In a series of X posts, Justin Bons, founder of Cyber Capital, called attention to Tether's lack of proof of its $118 billion in collateral. He raised concern that Tether could pose more risks than the FTX collapse.

2/17) The potential for collapse here is greater than Terra Luna!

Making it one of the biggest existential threats to crypto as a whole

As we have to trust they hold $118B in collateral without proof!

Even after the CFTC fined Tether for lying about their reserves in 2021... pic.twitter.com/KoJFbyjRj1

- Justin Bons (@Justin_Bons) September 14, 2024

He reiterated the company's CFTC penalty in 2021 for manipulating its reserves records. The crypto researcher also noted that Tether poses a huge threat of sudden collapse in the industry.

Bon said this about Tether USDT, The potential for collapse here is greater than Terra Luna! Making it one of the biggest existential threats to crypto as a whole. We must trust they hold $118B in collateral without proof! Even after the CFTC fined Tether for lying about their reserves in 2021."

Additionally, Bons talked about Tether's transparency and business structure. He noted that Tether published an auditor's report through its partnership with BDO but has yet to release a report of its reserves to an independent audit for verification.

The concern about Tether's growing dominance is growing daily within the crypto community.

According to data from CoinMarketCap, Tether USDT now has over 75% of the stablecoin market. Moreover, USDT recorded an over 20% increase in market valuation within the past two years.

These concerns stem from the FTX implosion in 2022, which triggered huge investor losses. Its rising dominance raises fear of a massive loss should it face a liquidity crunch like FTX.

A Hypothetical Drive On Tether Collapse

Meanwhile, an expert compared a hypothetical Tether collapse to FTX's liquidity crunch. FTX failed because it could not provide $6 billion in liquidity for users' withdrawals within three days.

However, IDA Finance co-founder Sean Lee thinks a hypothetical Tether failure would be due to its banking relations and structural reliance on the underlying asset. Lee discussed this option in an exclusive interview with Cointelegraph.

Lee stated: Bear market or not, the possibility of Tether imploding is more about its structural connectivity to its underlying assets and banking rails, not so much market movement."

Further, Lee compared USDT with Washington Mutual Bank, on their stability to handle over $16 billion in withdrawals within a specified period. While Tether comfortably did so in May 2022 within 10 days without issues, Washington Mutual Bank couldn't stand the same pressure but collapsed in September 2008.

Amid the growing fear of Tether's possible collapse, some still have a positive opinion about the project. Author and intergovernmental blockchain professional Anndy Lian thinks Tether is too big to face implosion. However, he pointed out that the crypto space will face more threats from large centralized exchanges and platforms.

Lian explained that cryptocurrency has the intrinsic property to function without central control, ensuring security, transparency, and user autonomy. So, he noted that Tether, a centralized issuer, could influence the crypto market using its vast trades and liquidity volumes.

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