The U.S. Commodity Futures Trading Commission or the CFTC, has issued subpoenas to Bitfinex, one of the world’s largest cryptocurrency exchanges, and Tether, an affiliated company offering concerning it’s claims as a fiat backed cryptocurrency.
First reported by Bloomberg, the subpoenas were sent on Dec. 6 to virtual-currency venue Bitfinex and Tether, according to a person familiar with the matter, who asked not to be identified discussing private information. The firms share the same chief executive officer. This investigation arose because of recent questions regarding Tether’s financial stability.
Tether has become one of the more widely used tokens in the crypto space, having a market cap of 110 billion Php as of this writing. It prides itself as a good substitute for fiat, because each coin is attached to a dollar in a ratio of 1:1 (1 Tether = 1 Dollar). Recently, people doubt whether that really is the case. As Bloomberg reports. “While Tether has said all of its coins are backed by U.S. dollars held in reserve, the company has yet to provide conclusive evidence of its holdings to the public or have its accounts audited.” Skeptics have questioned whether the money is really there.
In the past month alone, over $1 billion of tethers have been issued. If Tether doesn’t hold a corresponding amount in its bank, the whole house of cards could come tumbling down, destroyed by a changeling swaddled in the mantle of the US dollar.
Tether always claimed that its “reserve holdings are published daily and subject to frequent professional audits,” but no such audit has been forthcoming, and the company severed ties with its auditing firm, Friedman LLP, on Monday.
Because of the subpoena news, Bitcoin crashed below $10,000, or 500,000 Php in a few hours. Whether the accusations are true or not, people in the community generally agree: better now than never, because if Tether is found to be not fully backed by fiat, we can avoid a market crash of even greater magnitude.