New York Attorney General Targets Tether: Stablecoins Should Be Issued by Regulated U.S. Companies

New York Attorney General Letitia James wrote to congressional leaders, suggesting that stablecoins should be issued by U.S. companies that are subject to federal and state laws and regulations. The letter directly pointed to Tether, the largest stablecoin issuer in the world, stating that its headquarters has relocated to El Salvador, and that its massive holdings of U.S. Treasury securities could trigger market turmoil if a bank run occurs.

Stablecoins should be issued by companies with a physical presence in the United States and regulated by U.S. law.

James pointed out in the letter that Tether, the issuer of the Tether stablecoin, has relocated its headquarters to El Salvador and mentioned that it has been investigated by regulators for misleading claims about its reserve status. The New York Attorney General's Office was the first regulatory body to hold Tether accountable and revealed that it had concealed losses of $850 million.

In addition, the document pointed out that Tether currently holds at least $94.5 billion in U.S. Treasury bonds, which is equivalent to 55% of the daily trading volume of the Treasury bond market. A wave of redemptions of stablecoins could trigger turmoil in the Treasury bond market, thereby affecting mortgage, auto loan, student loan, and credit card interest rates. Therefore, the document calls for stricter regulation of stablecoin issuers to ensure they are bound by U.S. law and subject to government oversight.

Stablecoin issuers should not become shadow banks.

James urged that stablecoin issuers should not become shadow banks, enjoying lower regulatory standards while transferring risks to the U.S. financial system, ultimately leaving taxpayers to bear the losses.

He also suggested that U.S. regulators should ensure the diversification of stablecoin reserves, require issuers to hold deposits at different institutions, and raise capital requirements to prevent a bank run crisis.

Tether had a backup plan? Issuing a new stablecoin after giving up USDT in the US.

Tether CEO Paolo Ardoino previously stated that Tether does not mind its flagship stablecoin USDT being banned in the U.S. due to new regulatory laws. In response, Tether is considering creating a new U.S. stablecoin and complying with the forthcoming U.S. stablecoin regulations.

( Tether does not mind USDT being banned in the United States and is considering the issuance of a new stablecoin in response to ).

This article New York Attorney General targets Tether: stablecoins should be issued by regulated U.S. companies first appeared in Chain News ABMedia.