2021-07-07 10:43:04
Why tether, the world’s third-biggest cryptocurrency, has got economists worried— Last month, Boston Fed President Eric Rosengren raised the alarm about tether, calling it a potential financial stability risk.
— The firm revealed that only a fraction of its holdings — 2.9%, to be exact — were in cash, while the vast majority was in commercial paper, a form of unsecured, short-term debt.
— Earlier this year, the New York attorney general's office reached a settlement with Tether and Bitfinex, an affiliated digital currency exchange.
— Tether and Bitfinex agreed to pay $18.5 million in the settlement and were barred from operating in New York state, however the companies didn't admit to any wrongdoing.
— Analysts at JPMorgan have previously warned that a sudden loss of confidence in tether could result in a "severe liquidity shock to the broader cryptocurrency market."
— But there are also concerns that a sudden increase of tether withdrawals could lead to a potential market contagion, affecting assets beyond crypto.
— "Fewer risks are posed by coins that are fully backed by safe, highly liquid assets, although authorities may still be concerned if the footprint is potentially global or systemic," the U.S. credit rating agency said.
Source: CNBC
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