In an unexpected turn of events, the U.S. District Court of Southern District New York, led by Chief Judge Laura Taylor Swain, ruled in favor of Tether and Bitfinex, discarding a class action suit leveled against the stablecoin issuer— a result embraced by Tether’s CTO, Paolo Ardoino. This lawsuit was instituted by Matthew Anderson and Shawn Dolifka in 2021, who were under the impression that Tether given false assurance of its stablecoin, USDT, being backed one-for-one by the US dollar.
The focal point of Anderson’s and Dolifka’s allegations were Tether’s claims of maintaining equal reserves in tandem with the USDT tokens in circulation. The lawsuit further projected that these reserves were made up of a combination of overcollateralized loans and undisclosed commercial paper, rather than just being solely U.S. dollars as initially implied by Tether. The plaintiffs argued that this misrepresents the actual value of the stablecoin.
Tether, on the other hand, retorted that the plaintiffs fell short of providing tangible proof of USDT’s value diminishment. This argument was bolstered by the U.S District court, citing a lack of factual evidence related to the alleged injury. Ardoino further kindled the issue by voicing his suspicion via Twitter of possible market manipulation aimed at depegging USDT. He associated these deviations with First Digital’s newly launched stablecoin, FDUSD.
Interestingly, amidst an uproar over the decentralization and governance of Tether, it remains unshaken as the dominant player in the stablecoin market. USDT’s circulation has peaked all-time highs with a market share of 66.7%, reaching momentous figures at $83.9 billion. In sharp contrast, USDT’s competitor Circle’s USDC has experienced a drop of 41.5% since the commencement of 2023, holding a supply of $26 billion and representing only a 20.7% market share.
In light of these proceedings, the regulatory perspective deserves mention. The Commodity Futures Trading Commission (CFTC) imposed a penalty of over $42 million on Bitfinex and Tether in October 2021, based on allegations that USDT was not fully backed all the time. The CFTC discovered that USDT maintained full backup by reserves for only 25% of the time in a 26-month period between 2016 and 2018. Tether was also charged with mingling reserve funds and the company’s corporate funds. Moreover, the U.S government has plans to reinforce stablecoin regulations with a newly proposed bill in the offing.
Source: Cryptonews
