Original|Odaily

Author|jk

Recently, the remarks of Ripple executives have once again pushed USDT to the forefront. Ripple CEO Brad Garlinghouse pointed out that the U.S. government could target Tether as the next regulatory target, a news that sparked a lot of attention and discussion in the market. Although Tether insists on the transparency and compliance of its USDT, doubts surrounding its potential risks remain.

USDT and Ripple war of words

According to the timeline, the recent war of words between Ripple and USDT can be divided into the following things:

On May 6, Ripple CTO David Schwartz revealed longest of the company's upcoming integration plans at the XRP Las Vegas conference. He introduced information about XRP Ledger, including AMM (AMM), lending protocol, Ripple stablecoin, and artificial intelligence. **Schwartz noted that details of the Ripple stablecoin will be announced at the XRPL Apex event in Amsterdam in June. **

Previously, it was reported that Ripple plans to issuance stablecoin backed by the US dollar. The stablecoin is expected to be issued later this year and will be 100% backed by dollar deposits, short-term U.S. government Treasuries and other cash equivalents, the company said. The stablecoin will first be deployed on Ripple's institutional-focused XRP Ledger and Ethereum Blockchain and will be based on Ethereum ERC-20 token standards.

On May 13, Ripple CEO Brad Garlinghouse said in a recent interview that the next target for the U.S. government is Tether, the stablecoin company responsible for USDT stablecoin circulation. He believes that Tether is an important part of the Crypto Assets market system, and he is not sure how this will affect other areas of the market. Some experts believe that the Ripple CEO's statement is a very big inside story, and if it does happen, then there will be very strong selling pressure in the USDT stablecoin market, at which point the price of USDT could fall significantly.

On the same day, USDT CEO Paolo Ardoino publicly hit back at Ripple on Twitter: "A CEO who leads a company under investigation by the US SEC Corporation (SEC) has launched a stablecoin of a competing product, and he's spreading fear about USDT." ”**

Subsequently, Ripple CEO Brad Garlinghouse replied: "I'm not attacking Tether...... The next thing I said on the podcast is, I think Tether is a very important part of the ecosystem, and my point is that the U.S. government has made it clear that they want to have more long control over dollar-backed stablecoin issuance, and as such, Tether, as the biggest player, is in their sights. ”**

At the same time, one noteworthy news is that on April 25, Democratic congressman leader Maxine Waters of the Financial Service Committee of the U.S. House of Representatives predicted on Wednesday that she and Chair Patrick McHenry would soon reach protocol stablecoin regulatory legislation. Waters said in an interview: "We are trying to reach a stablecoin bill in the near term. She added that she had discussed stablecoins with Senate longing leader Chuck Schumer and Senate banking chair Sherrod Brown, and said the Federal Reserve, Treasury Department and the White House were all involved in drafting the bill. **The impact of this bill on stablecoin issuance traders is unclear at this time. **

Will it be a thunder point: Why should USDT use Bitcoin as a reserve asset?

According to the transparency report on the USDT website, all reserve assets are listed: cash and cash equivalents and other short-term deposits account for 84.05% of the total reserves, which is broken down into: ** U.S. Treasuries 79.88%, overnight reverse repo protocol 12.2%, regular reverse repo protocol 0.9%, coin market funds 6.77%, cash and bank deposits 0.11%, and non-U.S. Treasuries 0.13%. This part of the asset has a high degree of Liquidity and security, and is the core of Tether's reserves, and generally the core of major stablecoin protocol. However, Bitcoin accounts for 4.87%, which is also the core point of controversy. **

The core point of stablecoins should be to keep the token pegged to the US dollar. **At this point, in order to maintain the stability of USDT, it does not seem that Crypto Assets-related assets should not appear in the reserve assets to isolate the correlation of USDT. If there is some kind of FTX-related event, and the market theoretically sees a large number of USDT redemption requests and Bitcoin sell demands, then if there is a connection between the two, there is a possibility of a death spiral: ** market problems – selling Bitcoin – USDT of reserve assets falling in value - USDT appears depeg – market panic increases, USDT bank run, and more long Bitcoin sell-off. From this point of view, USDT really shouldn't add Bitcoin to its reserve assets. In contrast, USDC has only real-world assets in reserve.

The advantage is that Bitcoin can longing reserve assets, helping to drop the risk of fluctuation in a single asset. The most important function is that Bitcoin can Hedging the risk of fiat coin and drop the extent to which reserve assets are tied to the US dollar and US bonds. Holding Bitcoin protects Tether from the depreciation of fiat coins such as the US dollar, and Bitcoin may provide a better long-term store of value in some cases, which adds a layer of security to Tether's overall reserves. And, being in line with the Crypto Assets ecosystem is also one of the reasons why Tether chose Bitcoin. As a Crypto Assets, Bitcoin as a reserve asset is more in line with Tether's positioning in the Crypto Assets ecosystem.

However, Tether currently has excess reserves of $6, 261, 866, 717,** as a percentage of its total liabilities of 6.02%. That said, even if all the Bitcoins in Tether's asset vault disappear overnight, Tether should not theoretically be depegged. **

Pros and cons

According to reports, Tether's net profit in the first quarter of 2024 exceeded $4.52 billion, a record high. Based on this data, analysts say that USDT is actually already the most successful project in the RWA zone in the Crypto Assets space, and it is also a status symbol for the dollar to maintain an important influence in the Crypto Assets space. So, there's no reason for the U.S. government to go to Tether's trouble. At the same time, this profit short also greatly drop the argument that some people think that Tether will rug: keeping the current profit margin in business will short much long higher than the profit brought by a one-time rug. **

However, many KOLs believe that since most stablecoins are currently denominated in US dollars, regardless of whether they are Tether or Circle, the status of US dollar denominations will not change. On the contrary, KOL Mr. man said,

"Allow me to say what Ripple can't say directly.

Tether is not directly regulated by government agencies such as the FinCEN or the Federal Reserve. **It is merely registered with FinCEN for reporting purposes and does not equate to being regulated. **Tether operates from the British Virgin Islands and is located outside the jurisdiction of major financial regulators, lacking transparency and oversight of its reserves.

Nonetheless, the Tether company must provide a monthly proof; As mandated by the New York State Department of Financial Services (NYDFS), but they only provide quarterly certifications. **I look forward to the seizure of USDT under pressure. **