US Government Targets Tether: Ripple CEO

Ripple CEO Brad Garlinghouse believes that the United States government is actively pursuing stablecoin issuer Tether, a move that could have significant implications for the cryptocurrency markets. Speaking on the World Class podcast on May 10, Garlinghouse stated that he is certain there will be another major event in the crypto industry, comparable to the collapse and subsequent revelation of fraud at FTX. While he did not explicitly label any potential U.S. action against Tether as the next black swan event, he described it as an “interesting one to watch.” Garlinghouse emphasized the importance of Tether within the crypto ecosystem and expressed uncertainty about the impact that U.S. regulatory measures against Tether would have.

These comments from Garlinghouse come as Ripple prepares to launch its own stablecoin later this year. Tether Holdings Limited, the parent company of Tether, operates a network of related subsidiaries worldwide that oversee various aspects of the stablecoin’s issuance and management. Tether is currently the world’s largest stablecoin in terms of market capitalization. In an October 2020 letter, U.S. Senator Cynthia Lummis and Representative French Hill urged the Department of Justice to thoroughly investigate the extent to which Binance and Tether are providing support to terrorism.

Tether responded to the letter by stating that it has always cooperated with law enforcement agencies and remains fully committed to working with authorities globally. In November 2022, it was reported that Manhattan-based U.S. Attorney Damian Williams had taken over a previous Justice Department investigation into Tether’s alleged concealment of funds linked to cryptocurrency. The company has faced criticism for its lack of transparency regarding its reserves and has undertaken quarterly third-party audits of its USDT reserves in recent years.

In October 2021, Tether paid a $41 million fine to the Commodity Futures Trading Commission after the regulator accused the company of misrepresenting its reserve holdings. The commission found that Tether only held sufficient reserves to back USDT for 27.6% of the examined period between June 1, 2016, and February 25, 2019. Ripple, Plans to introduce its own stablecoin backed by the U.S. dollar later this year. Ripple CTO David Schwartz revealed that the token would be supported by dollar deposits, short-term government Treasurys, and other cash equivalents.