The stablecoin ecosystem is facing turmoil as consumer advocacy group Consumers’ Research has launched a campaign against Tether, the issuer of the largest stablecoin USDT. The group alleges that Tether poses a threat to consumers and raises concerns about potential corruption and illicit activities.
Consumers’ Research has taken their accusations to Times Square, displaying a provocative ad branding Tether as “Tether to corruption.” Their CEO, Will Hild, cites reports claiming Tether had ties to the now-defunct FTX exchange and its founder, Sam Bankman-Fried, before its collapse.
Adding to the controversy, a blockchain analytics firm claims USDT was the most widely used stablecoin for criminal activities in 2023, facilitating billions in illicit transactions. Consumers’ Research alleges Tether has refused to conduct a comprehensive audit for over a decade, fueling suspicions about its operations.
If found guilty of wrongdoing, USDT could face the risk of de-pegging from the US dollar, potentially triggering market turmoil reminiscent of the LUNA/UST stablecoin collapse in 2022. Tether has defended itself by introducing a new gold-backed stablecoin, Alloy (aUSDT), as part of its expansion plans.
However, the accusations have amplified the need for transparency and accountability in the stablecoin sector, which plays a crucial role in the wider cryptocurrency ecosystem. As regulators and industry players grapple with the fallout of previous crypto firm failures, the Tether controversy underscores the importance of robust risk management practices.
