CRYPTO MOVERS AND PRICES
Crypto was marginally up to unchanged this morning as Ethereum (ETH) achieved new record highs above USD 2,700. ETH spot volumes are below the 30-day average on the move.
CRYPTO STORY OF THE DAY
Tether (USDt) has surpassed a market cap of USD 50 billion. The world's largest stablecoin has added an unprecedented 45 billion to its market cap in the last year, growing assets 10x.
USDt was launched in 2014 under the name Realcoin by Hong Kong-based Tether Ltd. Its goal was to offer a representation of USD in the crypto space by maintaining a 1:1 peg with USD held in reserves backing the asset. Launched at a time when access to services such as banking was difficult for the crypto space, USDt offered a type of fiat on-ramp for crypto businesses. For crypto-to-crypto exchanges, USDt continues to offer a means to bypass friction associated with fiat deposits.
In 2019, the New York Attorney General (NYAG) revealed it was investigating Tether and Bitfinex, which share management. The investigation focused on a USD 850 million loan Tether made to Bitfinex and was settled in February without the 2 firms admitting any wrongdoing. Tether agreed to regularly provide documents to NYAG that substantiate the reserves backing USDt and to bolster efforts to exclude New York residents from their services.
In March, Tether published an “assurance opinion” by accounting firm Moore Cayman “confirming that information in the company’s Consolidated Reserves Report is accurate.” Last week, Coinbase announced it would list the USDt. Stablecoins in general have received significant attention over the past several years, in particular since 2019 when Facebook announced its digital currency initiative, Libra, which has since been renamed Diem.
Global lawmakers and regulators reacted strongly against Diem, with U.S. politicians holding several Congressional hearings on the topic. During a hearing, Rep. Maxine Waters, Chairwoman of the House Financial Services Committee, said “it should be clear why we have serious concerns about your plans to establish a global digital currency that would challenge the [USD].” Last year, speaking in regards to Diem, Germany’s Finance Minister said: “[w]e must do everything possible to make sure the currency monopoly remains in the hands of states.”
Google search data shows that interest in USDt was highest in China, Cuba, Laos, and Turkey, countries where access to USD is limited.
Between the NYAG revealing its investigation of Tether and the case’s settlement, USDt’s market cap grew by roughly USD 32 billion. This growth suggests that crypto incumbents didn’t lose confidence in the asset, despite the NYAG’s claims. Moreover, stablecoins have remained a fixation of international lawmakers since the announcement of Diem, and Tether has successfully navigated this regulatory complexity. This view is supported by the addition of the coin to publicly-traded Coinbase.
This development may serve to dissuade some anxiety over regulatory risks faced by Tether. Considering the important role Tether has continued to play in the crypto ecosystem, developments such as its USD 50 billion milestone and NYAG settlement are symptoms of the massive growth and interest in the space within the last year.