Tether Faces New Scrutiny: Cyber Capital Founder Justin Bons Warns Tether Could Be a Bigger Threat Than FTX

Tether Faces New Scrutiny as Lack of Third-Party Audits Sparks Liquidity Crisis Fears

Investors are becoming more concerned about a potential liquidity crisis like FTX due to Tether‘s lack of third-party audits. The latest wave of concerns was sparked by Justin Bons, the founder of Cyber Capital, who expressed his worries that Tether might be an even bigger hoax than FTX.

Tether is one of the biggest existential threats to crypto as a whole. As we have to trust they hold $118B in collateral without proof! Even after the CFTC fined Tether for lying about their reserves in 2021.

Bons

The United States Commodities and Futures Trading Commission (CFTC) hit Tether with a $41 million civil monetary penalty in 2021 for falsely representing that USDT was completely backed by reserves. Data showing that Tether’s market share has topped 75% of the stablecoin industry following a 20% gain over the previous two years has raised concerns about the stablecoin giant’s power over the cryptocurrency space.

Tether’s $16.7B Withdrawal Record Under Scrutiny as Experts Warn of Potential Collapse

One of the most well-known black swan events in the sector, the collapse of the FTX exchange, which resulted in the loss of $8.9 billion in customer assets, is a contributing factor to the concerns. According to Sean Lee, co-founder of IDA Finance, a potential Tether implosion would be tied to its banking partners. In contrast, FTX’s failure was caused by its inability to honor huge consumer withdrawals of $6 billion within three days.

Bear market or not, the possibility of Tether imploding is more about its structural connectivity to its underlying assets and banking rails, not so much market movement. Otherwise, USDT would’ve suffered during the last bear market, but instead, it was actually (USD Coin) USDC that depegged due to their reliance on Silicon Valley Bank and Signature Bank.

Lee

Tether recognized customer withdrawals of over $16.7 billion in USDT in May 2022 without any problems, all within a 10-day period. However, in September 2008, Washington Mutual Bank experienced what is now recognized as the largest banking collapse in US history when it was unable to honor withdrawals totaling $16.5 billion in less than ten days.

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