Crypto Market & Bitcoin In Danger? World's Largest Stablecoin Is Only Controlled By 4 People

A major reason for the popularity of cryptocurrencies is their decentralization. According to Ethereum key developer Vitalik Buterin, nearly all crypto projects strive to achieve the highest blockchain trilemma. The majority of decentralized crypto protocols are still centralized, with only a few key people in charge.

‍

Centralization of the Tether USDT is too high

Tether USDT is the world's largest stablecoin in terms of market capitalization and daily trading volume, according to a recent report by the Wall Street Journal, and was largely controlled by four individuals by the end of 2018. By the end of 2018, the top Bitfinex and Tether individuals controlled approximately 86 percent of USDT according to the TradeAlgo database.

‍

In accordance with investigatory documents that were obtained as part of the 2021 investigation of Tether by the New York Attorney General and the federal Commodity Futures Trading Commission, in the year 2018 four men held Tether hostage.

‍

The chief financial officer of Bitfinex, Giancarlo Devasini, owned approximately 43 percent of Tether USDT as of 2018. Aside from that, the documents viewed by the WSJ also revealed that Bitfinex CEO Jean-Louis van Der Velde and Chief Counsel Stuart Hoegner each owned approximately 15 percent of Tether USDT in 2018. There was a fourth Tether USDT whale by the end of 2018, and it was Christopher Harborne, a British and Thai citizen, who controlled approximately 13 percent of the stablecoin.

‍

Aordino, Bitfinex's chief technology officer (CTO) as well as the CEO of Tether, Paolo Aordino, has attacked the report, describing it as a 'clown article', in which he called the cryptocurrency a 'fantasy'.

‍

In part due to a lack of clarity surrounding the reserves of Tether, the issuer of USDT, the company has found itself at odds with regulators. A fine of $41 million was imposed on Tether by the US Commodity Futures Trading Commission in late 2021 for making false statements about its reserves. According to the U.S. CFTC, only 27.6 percent of Tether USDT was fully backed by fiat between 2016 and 2018.

‍

Therefore, it would appear that the four individuals were simply minting USDTs out of thin air and putting them in circulation to be purchased with fiat currency to be exchanged for USDTs.

‍

Interestingly, before FTX's collapse last year, Tether USDT was closely associated with the FTX cryptocurrency exchange. According to reports, SBF had once asked Tether to print billions of USDT for the company in order to avoid its collapse. After the collapse of FTX and Alameda at the end of last year, Tether lost half of its trading volume, despite the fact that the company reportedly rejected SBF's request.

‍

Does the crypto market face a threat?

There is a strong reliance on stablecoins in the crypto market, especially during bear markets and bull markets. It is true that Tether USDT has been the leading player in stablecoins for a long time. However, there are other big players emerging as well, like Circle's USDC and Binance's BUSD. The result of this is that cryptocurrency traders are able to choose from a wide variety of stablecoins available on the market, from the best to the most regulated to the most cost-effective.