Author: Climber, Golden Finance
Recently, Tether, the leading project in the stablecoin market, celebrated its tenth anniversary. While detailing its development history, great achievements and prospects for the future, the project team announced that it would launch a documentary about USDT and its impact on fighting inflation to commemorate it.
After ten years of development, Tether's current market value is close to $1,200, far ahead of the second-place Circle by nearly $85 billion. Tether's CEO even said that USDT will gradually become a digital dollar. However, despite its bright and dazzling achievements, this "unicorn" company still faces many challenges and hidden dangers, including pressure from regulators, judicial authorities, and competitors, especially the accusation of its information opacity, which has raised questions about whether it may become the next FTX.
1. Remarkable achievements in the past ten years
On October 7, Tether issued a statement to celebrate the company's tenth anniversary. It stated that since its establishment in 2014, it has pioneered the concept of USDT, a digital currency pegged to the US dollar, and provided an unprecedented solution to the volatility of the cryptocurrency market. Today, USDT is the most widely used stablecoin with a market value of nearly $120 billion. It has completely changed the traditional financial industry and developed into a diversified technology giant.
The company's net profit in the first half of this year reached a record high of US$5.2 billion. In the second quarter of this year alone, Tether's profit reached US$1.3 billion, a record high.
Entering the third quarter, CryptoQuant data showed that stablecoin liquidity grew to a record $169 billion at the end of September, up 31% year-to-date. Tether's USDT accounts for 71% of the market share, while Circle's USDC, which ranks second, accounts for 21%.
Tether's revenue in 2023 is $6.2 billion, which is more than the $5.5 billion in revenue of BlackRock, a major global investment company, in the same year. BlackRock has 20,000 employees, while Tether has 100 employees.
Tether officials also made corresponding data summaries for the long development process of ten years.
Global Reach: With over 350 million users worldwide, we promote financial inclusion in emerging markets.
Working with Law Enforcement: Assisted more than 180 law enforcement agencies to recover more than $1.8 billion related to illegal activity.
Liquidity: During the 2022 UST crisis, $10 billion in redemptions were processed in a week, demonstrating Tether’s liquidity and reliability.
Expansion beyond stablecoins: Launching Tether Data, Tether Finance, Tether Power, Tether Edu, and Tether Evo to expand its impact.
Talking about the vision for the next 10 years, Tether said that although the company has made significant progress, there are still problems in regulatory transparency, scalability and the actual utility of digital currencies. In addition, Tether envisions a world where digital currency payments are seamless, accessible and inclusive to everyone. Tether's next decade will focus on enhancing global financial inclusion, expanding its token issuance, and promoting innovation in areas such as artificial intelligence, energy sustainability and blockchain education.
To commemorate Tether’s first decade and its vision for the next decade, Tether announced that it will release a documentary (Stability and Freedom in Chaos), focusing on Tether’s impact in countries such as Brazil, Argentina, and Turkey.
Tether’s success can be attributed to the following:
1. Close ties with the U.S. government
Tether’s CEO once said, “Tether is the best friend of the U.S. government,” and he said the company holds more U.S. Treasuries than Germany or any other competitor.
As of the second quarter of 2024, Tether directly and indirectly holds more than $97 billion in U.S. Treasuries. This makes Tether one of the top 20 buyers of U.S. Treasuries, surpassing the holdings of countries such as Germany, the United Arab Emirates, and Australia.
2. Assist the judicial authorities in combating crime
In September this year, Tether assisted the U.S. Department of Justice in freezing more than $6 million in assets of a Southeast Asian fraud project, and the U.S. Attorney's Office in Washington, D.C. publicly acknowledged Tether's assistance. In August, Tether teamed up with the FBI to recover $5 billion worth of cryptocurrencies, and the U.S. Attorney's Office for the Eastern District of North Carolina publicly commended Tether for its assistance in recovering funds related to major fraud schemes.
Tether said that to date it has assisted more than 180 law enforcement agencies in 45 jurisdictions in freezing more than $1.8 billion worth of USDT, redistributed more than $128 million of USDT to legitimate owners and law enforcement agencies, and voluntarily frozen more than 1,850 wallets related to illegal activities.
3. Global layout
In September this year, Tether partnered with Reku to launch a cryptocurrency literacy program in Indonesia. In addition, Tether partnered with Mahidol University in Thailand to introduce stablecoins, blockchain, and P2P technologies into MUIC’s curriculum.
In August, Tether plans to launch a stablecoin pegged to the United Arab Emirates Dirham AED. In addition, Tether announced a partnership with cryptocurrency company Xion Global to promote blockchain education in South Africa and established a strategic partnership with the African Blockchain Institute.
4. Strengthen compliance
Tether CEO Paolo Ardoino said the company will double its staff size over the next year to strengthen its capabilities in areas such as compliance, and expects the number of employees to reach about 200 by mid-2025.
2. Criticism, doubt, and challenge, Tether is surrounded by crises
Judging from the summary of Tether's tenth anniversary, the company has achieved brilliant results and has made considerable profits. However, it has encountered many troubles on its way to growth and development, and this year seems to be particularly serious.
Although Tether has a close relationship with the US government, there is still a view that the company may face strict scrutiny. Earlier, Ripple CEO Brad Garlinghouse said that the next target of the US government is Tether, the stablecoin company responsible for the circulation of USDT stablecoins.
Some experts believe that the statement of Ripple CEO is a very big insider report. If it really happens, there will be a very large selling pressure in the USDT stablecoin market. In this case, the value of USDT will fall sharply.
1. Questionable transparency of business and assets
Tether's market share exceeds 75% of the entire stablecoin market, which has raised concerns about Tether's influence on the crypto industry. Cyber Capital founder Justin Bons is worried that Tether may be a $118 billion scam that is bigger than FTX. He said that Tether has no proof of reserves and has never been audited; USDT is printing fake money (fraud) and has been found to forge documents, conceal identities, and lie about reserves.
In addition, he also said that the background of the Tether team is worrying, and the founding members have been involved in scandals such as Ponzi schemes and gambling cheating. And Tether is closely related to Bitfinex, and Bitfinex's partner bank Crypto Capital was once seized for money laundering.
As early as 2021, Tether was fined $41 million by the U.S. Commodity and Futures Trading Commission (CFTC) for lying that USDT was fully backed by reserves.
In addition, Deutsche Bank analysts also said that Tether’s reserves lack transparency and called the company’s solvency status “questionable.
The U.S. consumer protection organization Consumers' Research also released a report warning stablecoin issuer Tether that there are problems with the transparency of its U.S. dollar reserves.
2. Regulatory pressure
Analysts at JPMorgan Chase previously stated in a report that Tether's dominance is too strong, and increasingly stringent stablecoin regulations may pose a major challenge to Tether's market dominance, facing the risk of changing regulatory environments in Europe and the United States. According to the European (Markets in Crypto Assets Act) (MiCA), 60% of stablecoin reserves must be deposited in European banks, which may force Tether to adjust its reserve management strategy.
(Wall Street Journal) published an article saying that Tether is disrupting the US global sanctions system, and according to a UN report in January this year, USDT is the "first choice" for money laundering in Southeast Asia.
The US stablecoin regulation proposal reveals that Circle may be ahead of Tether, making it easier for the former to comply with the new stablecoin regulations.
The United Nations has warned that Tether is becoming increasingly popular among money launderers and is at the heart of a fraud industry.
3. Judicial proceedings
In September, Swan Bitcoin accused former employees of conspiring with Tether to steal mining operations. The lawsuit claims that former employees stole "highly proprietary code" from Swan's Bitcoin mining monitoring software and poached the company's suppliers and business partners.
In addition, Swan accused Tether of assisting in the implementation of this plan, saying that Tether provided "legal cover" for a hostile takeover by issuing a "default notice." Just four days after the former employee resigned, Tether notified Swan that Proton would take over the daily management of Bitcoin mining.
In a class-action lawsuit against Tether and Bitfinex, plaintiffs accuse the crypto companies of creating the illusion of increased demand, prompting the use of credit and loan funds to trade, ultimately driving up cryptocurrency prices. The lawsuit contains transcripts of chats and testimonies from the company operators, alleging that they admitted to the manipulation.
Celsius Network Limited also filed a lawsuit against Tether Limited and some of its affiliates in the U.S. Bankruptcy Court for the Southern District of New York through Blockchain Recovery Investment Consortium, LLC, demanding that Tether return approximately $2.4 billion worth of Bitcoin.
The comments come after Caroline Hill, Circle’s senior director of global policy and regulatory strategy, made comments during a House Financial Services Committee hearing on the topic of crypto crime, urging authorities to examine Tether’s involvement in terrorist financing.
Tether co-founder Brock Pierce also got involved in a legal dispute over his hotel project in Puerto Rico in August this year.
4. The stablecoin landscape is highly competitive
Competition in the stablecoin market is particularly fierce this year, with newcomers emerging one after another. According to Deflama data, there are currently 14 stablecoin projects with a market value of over US$300 million, and 6 projects with a market value of over US$1 billion.
Since January 1, 2024, USDT's market value has increased by $25.96 billion, from $91.74 billion to $172.5 billion. A representative stablecoin is First Digital's FDUSD, whose supply increased by $280 million in one day.
In addition to the above pressures, Tether is also facing the problem of declining profits due to the Fed's interest rate cut cycle. Stablecoin research company Bluechip said that for every 50 basis point rate cut by the Federal Reserve, Tether's annual revenue will decrease by $488 million and Circle's annual revenue will decrease by $144 million. As the Federal Reserve cuts interest rates, the income that stablecoin issuers receive from U.S. Treasuries will decline, which may force them to make riskier investments to make up for the loss of income.
Summarize
At present, Tether's leading position in the stablecoin market is unquestionable and even difficult to shake. After ten years of development, the company's market value has ranked among the world's famous companies, and its number of users and profitability are also first-class. However, the saying that a big tree attracts the wind also applies to Tether. The outside world has been speculating and questioning it, and it has indeed failed to provide sufficient evidence. With the increasingly stringent supervision in the future, only when the strong wind of review comes can we test whether Tether is really deeply rooted.
