Is the US Targeting Tether? 

Ripple CEO Brad Garlinghouse has expressed that it is “clear” the United States government is targeting Tether, a prominent stablecoin issuer. This potential action could have unpredictable effects on the cryptocurrency markets.

During a May 10 episode of the World Class podcast, Garlinghouse asserted that there would “100%” be another significant crypto-related event, similar to the collapse and fraudulent activities revealed within FTX’s executive ranks. He stated, “The U.S. government is going after Tether, that is clear to me,” although he did not provide further details. Garlinghouse stopped short of predicting any U.S. action against Tether as the next major disruption, instead calling it an “interesting one to watch.”

Garlinghouse emphasized Tether’s importance within the cryptocurrency ecosystem, adding that he couldn’t predict the impact of potential U.S. regulatory actions against it. His comments come as Ripple prepares to launch its own stablecoin in 2024.

Tether Holdings, the parent company of various subsidiaries responsible for issuing and managing the Tether stablecoin (the largest by market capitalization), has been under scrutiny. In October 2023, U.S. Senator Cynthia Lummis and Representative French Hill urged the Department of Justice to “carefully evaluate the extent to which Binance and Tether are providing material support and resources to support terrorism.” Tether responded by stating it had “always assisted law enforcement” and remained “fully committed” to collaborating with global authorities.

Bloomberg reported in November 2022 that U.S. Attorney Damian Williams of New York took over a prior Justice Department investigation into Tether’s alleged concealment of crypto-linked funds from banks. Additionally, Tether has faced criticism for its lack of transparency regarding the reserves backing USDT and has published quarterly third-party audits in recent years. In October 2021, Tether paid a $41 million fine to the Commodity Futures Trading Commission for “misrepresenting to customers” its reserve holdings. The regulator found Tether held sufficient fiat reserves to back USDT for “only 27.6% of the days” between June 1, 2016, and February 25, 2019.

Ripple’s upcoming U.S. dollar stablecoin, set for a 2024 launch, will be backed by dollar deposits, short-term government Treasurys, and “other cash equivalents,” according to Ripple’s chief technology officer, David Schwartz.