Tether, the issuer of the prominent stablecoin USDT, has seen substantial growth with a $13 billion increase in market value and an additional $1 billion USDT minted recently. Despite its financial success, JPMorgan’s latest report raises concerns about Tether’s rapid expansion and its potential risk to the cryptocurrency market, citing a lack of regulatory transparency.
JPMorgan’s report underscores the growing risk Tether poses to the cryptocurrency market due to its lack of compliance and transparency. The report arrives at a time when regulatory scrutiny of stablecoins is intensifying in the US and Europe, with legislative actions on the horizon.
In the US, a stablecoin bill is pending in the House of Representatives, while the European Union is set to partially implement its cryptocurrency regulations (MiCA) in June. JPMorgan suggests that stablecoin issuers who adhere to regulations could benefit and capture more market share amidst the regulatory developments.
Tether, having paid a $41 million fine to the CFTC in 2021 for misrepresenting its reserves, has made efforts to improve transparency. However, JPMorgan notes that Tether still falls short in regulatory compliance compared to its competitor USDC, despite both being in the top ten cryptocurrencies by market cap.
The JPMorgan report also points out Tether’s impressive profitability, with its net profit amounting to 10% of JPMorgan’s earnings. Tether’s market value surged by 35% last year, and it aims to reach $100 billion in circulation. In response, Tether CEO Paolo Ardoino acknowledges their market dominance and asserts their commitment to working with regulators and educating on technology.