Senate Wants Answers from Tether CEO 

U.S. Senate Banking Committee chairman Sherrod Brown recently sent a letter to Tether Holdings Limited CEO Jean-Louis van der Velde expressing concerns about stablecoins and seeking answers by next month.  

The President’s Working Group on Financial Markets’ latest report says stablecoins threaten investor protection and market integrity. In his letter, Brown noted that the market value of stablecoins produced by the major stablecoin issuers hit $127 billion in October 2021, up almost 500% from 2020. 

“I have significant concerns with the non-standardized terms applicable to the redemption of particular stablecoins, how those terms differ from traditional assets, and how those terms may not be consistent across digital asset trading platforms,” he wrote. 

While stablecoins are often “minted” in return for U.S. dollars or other conventional currencies, purchasing stablecoins via a trading platform may not give users the same rights and entitlements as buying directly from an issuer. 

Brown asked questions related to Tether’s fundamental buy, exchange or minting processes in U.S. dollars and asked for van der Velde’s answers by Dec. 3. He also wants an explanation of how to redeem Tether for U.S. dollars, minimum redemption size, waiting time and internal evaluations or studies Tether has conducted. 

Brown is also pushing for answers on the market or operational factors that impede the acquisition or redemption of Tether in U.S. dollars or another digital asset and information on any trading platforms that have specific Tether rights, privileges or agreements. 

Related: Tether Must Pay $41M After Misleading Customers About Stablecoin Backing 

Tether is paying $41 million in fines after the Commodity Futures Trading Commission (CFTC) said the company misled customers and potential buyers for almost three years by claiming its digital tokens were backed by sufficient dollar reserves. 

Tether was being disingenuous about its stablecoins’ backing from at least June 2016 to February 2019, the CFTC said. Tether is responsible for about half of the stablecoins in circulation, accounting for more than $69 billion. 

The findings against Tether showed that the company only had enough reserves to back all the tokens in circulation for slightly more than one-quarter (27.6%) of the days from September 2016 to November 2018.