The banking crisis that gripped the United States, had a domino effect on stablecoins, particularly on Circle’s USDC. Investors flocked to rival stablecoin Tether (USDT) as USDC’s value fell below the $1 mark. Although the asset has regained its dollar peg, the market cap of the project has significantly decreased.
USDC is not the only stablecoin to face issues. In mid-February 2023, Binance’s BUSD stablecoin issued by Paxos saw the end of its issuance. The U.S. Securities and Exchanges Commission (SEC) cited Paxos Trust for failing to declare the Binance stablecoin as a security. BUSD has been identified by the SEC as an unregistered security, with all the potential legal ramifications that could ensue. The New York Department of Financial Services ordered Paxos Trust Co. to stop printing any more BUSD.
With two large players in the stablecoin industry out of the way, Tether (USDT) has managed to attract a significant clientele from both platforms. According to data from CryptoSlate, the supply of USDT has increased by more than 10% in the previous 30 days to $77.8 billion. Even Binance founder and CEO, CZ, acknowledged USDT’s growth on Twitter.
Moreover, in 2022, Tether handled more settlements than Visa and Mastercard, two of the largest payment platforms. While Visa and Mastercard undertook $7.7 trillion and $14.1 trillion settlements respectively, Tether handled $18.2 trillion. Moreover, Indonesia announced that the country will be phasing out Visa and Mastercard. Additionally, the development will likely see an increase in Bitcoin (BTC) and USDT use, as pointed out by Gabor Gurbacs.
The downside of Tether (USDT)
Although Tether has maintained its popularity among users, there are some aspects that attract criticism. One of the major drawbacks of the project is its reluctance to share its proof of reserves. Despite repeated promises, the platform has not been transparent about whether each token is backed 1:1 with the dollar or not.
The company finished its reserves attestation by the well-known international accounting firm BDO in February 2023. The consolidated reserves report (CRR) for Tether as of December 31, 2022, is accurate, according to BDO’s assurance opinion, which was made public by the stablecoin company on February 9. According to the CRR, Tether has consolidated assets worth at least $67 billion, more than its liabilities, which total $66 billion, and excess reserves of at least $960 million. However, a complete backing of assets is still due from the company’s side.
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