​Former SEC official calls for banning USDT stablecoin in the US

What’s new? Former US Securities and Exchange Commission (SEC) attorney John Reed Stark said that the country lacked a regulatory framework to regulate companies like Tether (the issuer of the USDT stablecoin). He explained that the States do not regulate how stablecoin reserves are invested, and there are no auditing and reporting requirements. In this regard, Stark called on US financial regulators to ban crypto companies from operations with USDT, calling Tether a “mammoth house of cards.”

IMHO, Tether is a Mammoth House of Cards.Having studied markets and financial statements for 35 years, including during my 18 years as an attorney in the SEC Enforcement Division, IMHO, Tether, could be the next domino to fall. https://t.co/38SFD2fsRkTether, the first… pic.twitter.com/fOy3pzImbS — John Reed Stark (@JohnReedStark) May 9, 2023

What else did Stark write? According to the former official, his experience, and study of markets and financial reports in recent years suggest that Tether could collapse in the future, as has previously happened to other major crypto firms.

“Tether’s fundamental business, the essence of everything Tether does, is tied exclusively to Tether’s financial reserves,” he said. In this, “those reserves remain unaudited, unconfirmed and therefore dubious,” Stark added. This is a troubling signal, he said, because Tether users have to deal with its “condescending and ineffective public relations blather, hype, and bluster.”

Stark criticized Tether’s attestation, saying it cannot replace an audit. According to him, audits are designed to look for potential risks, while attestations only check whether the data provided is accurate at a given time. The expert stressed that attestation “would never pass any sort of regulatory muster.”

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In addition, Tether’s reserves were previously verified by an unknown firm in the Cayman Islands with five employees on staff. Stark noted that the company is now no longer legally required to report its reserves, which raises a lot of questions about their status.

Meanwhile, Tether released its Q1 financial report on May 10, reporting a net profit of $1,48 billion. The volume of the company’s excess reserves totaled $2,44 billion. The report was prepared by BDO Italy, a leading accounting firm.

Stark also questioned why the company’s financial condition is constantly discussed by its CTO Paolo Ardonio and not the CFO.

The former SEC official recalled that Canadian authorities have banned crypto platforms from offering USDT, and urged the US to do the same. On January 31, the Crypto.com exchange delisted the USDT stablecoin and all trading pairs with the asset for Canadian users. According to media reports, the decision is due to the requirements of the Ontario Securities Commission (OSC).

Previously, Stark called the exchange Binance a “shadow bank” that issues its own fake currency and provides services without oversight or audit of US regulators.