Tether’s stablecoin USDT, which is designed to be pegged to the US dollar, has depegged from its $1 value on major cryptocurrency exchanges. This occurred after Tether announced on December 15th that it had frozen over $435 million worth of USDT at the request of government agencies including the DOJ, FBI, and Secret Service.
The de-pegging indicates declining confidence in Tether policies following this large-scale asset freeze done in collaboration with authorities. Tether outlined in a letter that it works extensively with law enforcement to disrupt criminal activity involving USDT. However, its posture as a neutral stablecoin issuer is now being questioned by many in the crypto community, shocked at Tether’s willingness to blacklist addresses holding huge sums.
Apart from the asset freeze, Tether’s massive USDT supply expansion in 2023 has also raised concerns. Tether’s market cap crossed $90 billion after a 70% climb this year, with around $23 billion new USDT minted. While Tether claims this reflects robust demand, critics see it as problematic unbacked printing to prop up Bitcoin prices in coordination with exchanges.
The combination of rapid supply growth and compliance with authorities seems to be eroding faith in Tether. This helps explain why USDT has depegged from its $1 value. The main worry now is that USDT instability spreads more widely since crypto relies heavily on USDT liquidity. Rival stablecoins like USDC may benefit if doubts over USDT persist and the depegging continues. The coming days will determine if Tether can reclaim dollar parity.
#Tether #USDT #Stablecoin #Depeg #Crypto
