- Ripple CEO Brad Garlinghouse expresses concerns about the U.S. government targeting Tether, suggesting potential impacts on the crypto market.
- Garlinghouse speculates on the possibility of a major crypto-related black swan event, akin to the FTX collapse.
- Amidst regulatory scrutiny, Ripple plans to launch its own U.S. dollar stablecoin in 2024.
Brad Garlinghouse, CEO of Ripple, voiced concerns over potential U.S. regulatory actions against Tether, indicating a possibly turbulent future for the crypto markets. During his appearance on the May 10 episode of the World Class podcast, Garlinghouse discussed the significant role Tether plays within the cryptocurrency ecosystem and the unclear implications of any targeted regulatory measures.
U.S. Scrutiny of Tether
Tether, the issuer of the world’s largest stablecoin by market capitalization, has been under continuous scrutiny from U.S. regulators and lawmakers. Notably, in October 2023, U.S. Senator Cynthia Lummis and Representative French Hill called on the Department of Justice to evaluate Binance and Tether’s operations concerning their compliance with anti-terrorism financing laws. Furthermore, the New York-based U.S. Attorney Damian Williams has been involved in an ongoing investigation into allegations that Tether concealed crypto-linked funds from banks.
Tether’s Response and Regulatory Fines
In response to regulatory pressures, Tether has insisted on its commitment to cooperating with law enforcement and regulatory bodies worldwide. Despite this, the company has faced criticism for its opaque reserve backing practices. In October 2021, Tether settled with the Commodity Futures Trading Commission, paying a $41 million fine for misrepresenting the reserve holdings that back its USDT token.
Ripple’s Forthcoming Stablecoin
Amidst the ongoing regulatory drama surrounding Tether, Ripple is preparing to launch its own stablecoin, which it plans to back with U.S. dollar deposits, short-term government Treasuries, and other cash equivalents. According to Ripple’s chief technology officer David Schwartz, this new stablecoin aims to offer a secure and transparent alternative in the stablecoin market.
Implications for the Crypto Market
Garlinghouse’s remarks highlight the increasing attention of U.S. regulators on the stablecoin market, particularly focusing on entities like Tether. The potential for regulatory actions or significant legal challenges against Tether could indeed lead to unpredictable consequences for the broader cryptocurrency market, which heavily relies on stablecoins for liquidity and transactional purposes.
The developments around Tether and Ripple’s strategic moves to launch a competing stablecoin will be critical for investors and market participants to watch, as they could reshape the landscape and operational standards within the cryptocurrency ecosystem. As the market anticipates Ripple’s stablecoin launch in 2024, the dialogue around regulatory compliance and market stability continues to evolve.
