Tether’s (CRYPTO:USDT) lack of third-party audits and transparency surrounding its $118 billion reserves is raising concerns among investors.
As the issuer of the USDT stablecoin, Tether holds significant market influence, but doubts persist about its financial structure and reserve backing.
Justin Bons, founder of Cyber Capital, highlighted these issues, stating that Tether poses a significant risk to the crypto ecosystem due to the lack of clear evidence about its reserve holdings.
Bons referenced the $41 million fine imposed on Tether by the U.S. Commodities and Futures Trading Commission (CFTC) in 2021 for misrepresenting its reserve backing.
The stablecoin's market dominance has grown, now accounting for more than 75% of the stablecoin sector, further fueling concerns about its potential impact on the broader market.
Critics worry that if Tether were to face a liquidity crisis, it could have significant consequences for the cryptocurrency space.
Sean Lee, co-founder of IDA Finance, explained that any issues with Tether would likely stem from its banking relationships rather than market fluctuations.
While Tether has successfully handled liquidity challenges, such as $16.7 billion in withdrawals in May 2022, the opacity of its governance structure remains a concern for many in the industry.
Bons also noted that Tether’s board consists of just two members, which raises questions about the centralization of control over its reserves.
Despite publishing attestations from accounting firm BDO, Tether has yet to undergo a full, unrestricted third-party audit, leaving its financial structure open to criticism from industry observers.
At the time of reporting, the Tether (USDT) price was $1.00.