- JPMorgan analysts say Tether is too dominant.
- In a report to clients, the bank says Tether is at risk from a changing regulatory landscape across Europe and the US.
- Tether CEO Paolo Ardoino pushed back against JPMorgan’s claims, labelling the financial services giant “hypocritical.”
- “Wall Street is currently raving about an asset that’s been underpinned by Tether for the last decade.”
JPMorgan analysts cautioned against Tether’s dominance, which they labelled “negative” for the growing crypto ecosystem.
“Tether is mostly at risk given its lack of regulatory compliance and transparency,” the analysts wrote. “We…view the increasing concentration in Tether over the past year as a negative for the stablecoin universe and the crypto ecosystem more broadly.”
Tether was quick to retort.
“Wall Street is currently raving about an asset that’s been underpinned by Tether for the last decade,” CEO Paolo Ardoino told DL News in a statement.
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He was presumably referring to Bitcoin, which BlackRock boss Larry Fink and Ark Invest’s Cathie Wood have hailed as a strong haven asset.
Tether says it allocates up to 15% of its operating profit to Bitcoin purchases.
“Tether’s market domination may be a ‘negative’ for competitors, including those in the banking industry wishing for similar success, but it’s never been a negative for the markets that need us the most,” Ardoino said.
He added: “It seems hypocritical, the talk about growing concentration from the biggest bank in the world.”
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JPMorgan’s note comes as Tether faces mounting scrutiny. The UN said last month that Tether is the “preferred choice” for cybercrime gangs throughout Asia.
One question often lobbed at Tether has been whether it has the reserves on hand to meet redemption requirements and what that could mean for the health of the crypto market in the long term.
Its financial attestations are compiled by accounting firm BDO Italia, rather than through a comprehensive audit of the company’s assets and debts.
Cantor Fitzgerald’s CEO said in January that the stablecoin has got the reserves it claims to have. The financial firm’s chief said Tether has the money “they say they have.”
According to the firm’s latest attestation, Tether had $97 billion in assets and about $92 billion in liabilities as of December 31. By its measure, Tether is solvent and functioning as expected.
Regulatory clarity may be a boon for competitors like USDC, the bank’s analysts wrote, despite Tether’s long-standing tenure as the world’s largest stablecoin.
The bank notes that Circle, the issuer of USDC, is preparing for regulatory shifts, including filing for a US IPO, which could position it for expansion.
Still, Tether accounts for a significant portion of available stablecoins, with about $96.3 billion, a 71% market share, according to DefiLlama data.
The analysts said the total value of stablecoins has increased from $122 billion in October 2023 to $135 billion, reflecting capital inflow from traditional finance.
That’s the first time stablecoins have had positive growth since the collapse of Terra back in May 2022.
Another concern cited in the note was Tether’s ability to adapt amid a shifting regulatory landscape as legislation across Europe and the US begins to set out rules for stablecoins.
The US Congress is considering the Clarity for Payment Stablecoin Act, while Europe anticipates partial implementation of its Markets in Crypto-Assets, dubbed MiCA, later this year.
Both aim to establish guidelines on transparency, reserve management, and operational standards for entities issuing stablecoins.
“We’ve always worked closely with global regulators to educate them on the technology and provide guidance on how they must think about it,” Ardoino said.
Crypto market movers
- Bitcoin is up 0.94% today at $39,986.21.
- Ethereum is up 0.31% today at $2,310.75.
What we are reading
Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at firstname.lastname@example.org.