Stablecoin operator Tether and its parent company Bitfinex recently filed a petition to the Supreme Court of New York to block an information request submitted by cryptocurrency media outlet CoinDesk.
Tether Under Pressure from the Crypto Industry
At the end of June, CoinDesk filed a Freedom of Information Law (FOIL) request – which under New York law allows members of the public to submit requests for access to government records – to the office of the Attorney General, demanding to see documents and other important materials attesting to Tether’s reserve composition and the settlement agreement between the New York Attorney General (NYAG) and Tether/Bitfinex.
Tether and Bitfinex’s petition was filed on the last day of August by the companies’ attorney, Charles Michael, citing “harm to its competitive position”:
Competition is fierce, with upstart exchanges constantly entering the market and challenging the incumbent. Bitfinex and Tether differentiate themselves from their competitors using at least three secret and competitively sensitive types of data that are at issue in this proceeding: 1) financial strategies; 2) compliance measures and documentation; and 3) customer data.
It would tilt the competing playing field against Tether. CoinDesk, the online publication seeking the records in this case, has itself summarised what competing stablecoins have disclosed, and none [is] at the level of detail in the requested documents.
Tether and Bitfinex’s petition
Market Demands Transparency from Stablecoins
More stablecoin issuers are racing towards providing better disclosure of their reserves and transparent financial information for their users, yet it has been a complicated challenge for the industry.
Tether previously reaffirmed its assets are “fully backed by reserves”, yet failed to disclose what type of reserves it’s referring to, raising concerns in the crypto community about the company’s legitimacy.
At first, Tether released several public assurance opinions made by an audit provider service called Moore Cayman in an attempt to shut down the market manipulation rumours, but this wasn’t enough to convince the crypto community. These rumours only accelerated the decline in Tether’s supply growth, which has been surpassed by USD Coin (USDC), according to data from CoinMetrics.
It was only after Circle – the second-largest stablecoin issuer (USD Coin) – disclosed its financial information and the composition of USDC’s investments that Tether finally revealed its reserves.
Tether’s reserves are a combination of assets, the majority of them being commercial paper and fiduciary deposits, with only 3.87 percent of the USDT reserve is held in cash.
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