B
Bored Ape Crypto Club
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Another panic has begun around USDT due to potential sanctions from the US. Is it beneficial for the Americans to collapse the main stablecoin? Quite possible, since USDC looks much more promising for them because it belongs to Circle. But is such a scenario possible? I think not, since this would be a collapse for the entire crypto.
Let's figure it out... This will be a longread.
The collapse of USDT is only theoretically possible, like any financial system, but the likelihood of this depends on a number of factors. Below, we will consider the key risks:
Lack of transparency and audit.
For a long time, Tether has been accused of insufficient transparency of its reserves. If it turns out that the reserves are not enough to cover all issued tokens 1:1 with the dollar, this could undermine confidence in USDT. Although the company publishes reports on its reserves, the audit was not always carried out in full by independent auditors.
Regulatory pressure.
Regulators in the US and other countries have already expressed concerns about stablecoins. If strict restrictions or a ban on the use of USDT are introduced, this could cause massive withdrawals and loss of liquidity. In 2021, Tether settled a case with the New York Attorney General's Office and was fined $18.5 million for false statements about its reserves. Similar incidents can and do occur again.
Risk of loss of trust.
If information appears about the lack of reserves or violations by Tether, this can lead to panic selling. In this case, the USDT rate may fall below $1. The transition of some users to other stablecoins (for example, USDC or DAI) can also weaken the position of USDT.
Systemic risks in the crypto industry.
A significant part of cryptocurrency exchanges and trading pairs rely on USDT as the main form of liquidity. If Tether were to fail, it could have a domino effect on the crypto industry, especially if alternative stablecoins are unable to quickly replace its liquidity.
Legal and financial threats.
If Tether were to be hit with large lawsuits or bank accounts seized, it could cause a liquidity crisis.
While there are threats of a USDT collapse, the company has successfully dealt with crises of confidence over the years. However, investors should keep a close eye on news and regulatory decisions, and diversify their exposure to other stablecoins or cryptocurrencies, as I do with my personal assets.
Let's figure it out... This will be a longread.
The collapse of USDT is only theoretically possible, like any financial system, but the likelihood of this depends on a number of factors. Below, we will consider the key risks:
Lack of transparency and audit.
For a long time, Tether has been accused of insufficient transparency of its reserves. If it turns out that the reserves are not enough to cover all issued tokens 1:1 with the dollar, this could undermine confidence in USDT. Although the company publishes reports on its reserves, the audit was not always carried out in full by independent auditors.
Regulatory pressure.
Regulators in the US and other countries have already expressed concerns about stablecoins. If strict restrictions or a ban on the use of USDT are introduced, this could cause massive withdrawals and loss of liquidity. In 2021, Tether settled a case with the New York Attorney General's Office and was fined $18.5 million for false statements about its reserves. Similar incidents can and do occur again.
Risk of loss of trust.
If information appears about the lack of reserves or violations by Tether, this can lead to panic selling. In this case, the USDT rate may fall below $1. The transition of some users to other stablecoins (for example, USDC or DAI) can also weaken the position of USDT.
Systemic risks in the crypto industry.
A significant part of cryptocurrency exchanges and trading pairs rely on USDT as the main form of liquidity. If Tether were to fail, it could have a domino effect on the crypto industry, especially if alternative stablecoins are unable to quickly replace its liquidity.
Legal and financial threats.
If Tether were to be hit with large lawsuits or bank accounts seized, it could cause a liquidity crisis.
While there are threats of a USDT collapse, the company has successfully dealt with crises of confidence over the years. However, investors should keep a close eye on news and regulatory decisions, and diversify their exposure to other stablecoins or cryptocurrencies, as I do with my personal assets.