Congress Considers Stablecoin Rules, Tether Appears As The ‘Bad Boy’
As The U.S. Congress is considering new stablecoin regulations, it seems that members have an agenda to keep anything like Tether (USDT) from happening again.
The House Financial Services Committee and the Senate Banking Committee have been hearing Treasury undersecretary Nellie Liang’s testimony on stablecoins. The hearings come as a follow-up to a report on stablecoins from the President’s Working Group on Financial Markets, a report that Liang was in charge of.
The PWG report was focused on the risks that unbacked or underbacked stablecoins could lay upon investors holding them, which has been a primary concern. While the report does not name any specific firm, Tether has clearly become a concern for many lawmakers, this week’s hearing in the House showed.
Bill Posey (R-FL) asked Liang “Can you tell us if Tether is backed by a dollar or cash equivalent?”
To which Liang answered, “My understanding from what they disclose is that their backing includes assets that are not risk-free.”
Posey then continued: “Has Tether been issued that is not totally or fully collateralized.”
Liang replied: “I suspect that is the case. They are not regulated. They publish data, but from what I understand they may not be able to deliver.”
“I do have concerns about the opacity of the reserve assets of stablecoin issuers,” Liang elaborated.
As stablecoins next week are again covered in the Senate Banking Committee, these comments will be fresh, as will similar concerns that have already appeared before the upper chamber.
Sherrod Brown (D-OH), the committee’s chairman, showed frustration while trying to contact Tether’s executives. In a February 9 hearing before the Senate Agriculture Committee, one of the witnesses presented the same problem. University of Pennsylvania professor Kevin Werbach stated in the hearing:
“The stablecoin Tether continues to play an outsized role in the digital asset world despite having been found to be lying about their backing.”
Tether’s latest attestations show a reduction in commercial paper investments in percentage terms. The reduction in commercial paper exposure comes as a response to community feedback.
However, still unspecified commercial paper accounts for over 40% of Tether’s declared reserves.
