BitMEX Research Paper Suggests Regulation Greatest Threat to Tether, not Reserves
Contrary to popular belief, the greatest threat to the controversial cryptocurrency Tether may not be a lack of USD reserves. In a recent paper published by BitMEX research, the institute concluded that the greatest long term threat to Tether was most likely regulations rather than a lack of liquidity.
Tether is a project that is aiming to tokenize fiat money by creating digital versions of existing currencies. For example, USDT is a digitized version of the US dollar that is pegged in a 1:1 ratio. The function being that it enables exchanges to create fiat to crypto trading pairs to bypass regulations. In theory, for every USDT that is issued, there is one USD in reserve to back it up. So, currently, Tether should have $2.2 billion in reserve.
However, there has been a great deal of speculation and FUD surrounding Tether, as many believe they do not have the liquidity they claim they do. This was exemplified further when the relationship between the auditing group Friedman LLP and Tether was dissolved.
Tether is also heavily entwined with Bitfinex, one of the largest cryptocurrency exchanges, which only added fuel to the fire that the foundations of the markets could be heading for collapse. Several other of the largest exchanges including Binance and Bitrexx have significant USDT trade volumes.
Now the research initiative BitMEX has published the results of their paper which suggest that Tether does in fact have the reserves it claims it does. This was further backed up by Binance CEO Changpeng Zhao in an interview with Crypto Lark earlier this week. The paper draws on numerous case studies from the past which they believe indicate regulations are the biggest long term concern for Tether.
BitMEX suggest that, to avoid being shut down by authorities, the system needs to undergo some kind of reform and implement some anti-money laundering and KYC procedures. They also state they do not believe that a Tether shutdown is imminent, but stress the importance of reform for the future.