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Bitmex- Tether may not be a fraud but vulnerable to regulations

Feb 20, 2018 Posted /  1346 Views

Bitmex- Tether may not be a fraud but vulnerable to regulations

Bitmex's research wing, which is known for it elaborate and extensive investigations has come up with a new report on Tether, the one crypto-coin that has been persistently claimed by its creators to be secured with US Dollar. The report seems to be extremely comprehensive and the question about Tether's present standing has been analyzed by the service providers. Notably, the virtual currency had found itself in the pool of trouble as there were allegations precedent by the critics that Tethers are not supported by fiat currency reserves and US regulators are planning to shut down the service.

Tether regains focus

You might see that the media has been debating about the postion of the Tether in the market and everyone from Ari Paul to Weiss Ratings has weighed in their opinion and analysis. The debate typically surrounds the legitimacy of the currency with revelations of connections with Bitfinex and the possibility of the strike by the US regulators. Bitmex has chipped in saying that while its report is obviously not the last thought on the matter, still they have tried to answer a lengthy set of questions pertaining to its existence.

Bitmex report has tried to verify the pointers in the criticism against the company. The abstract to the report, in the beginning, notes down as follow:

"There is some scepticism about Tether, with accusations that the system is not backed by sufficient reserves. We think that scepticism is misplaced. We have found possible evidence in published financial data that the impact of Tether may be visible in Puerto Rico’s banking system. Tether is likely to be, or is already, encountering problems related to regulation and we think this should be the primary long-term concern for Tether holders."

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The abstract as you have read above supplies the fact that even  Bitmex acknowledges that there is growing consensus that Tether does have the assets to support its dollar-based tokens. However, despite its dollar reserves, the report has acknowledged that it may susceptible to regulatory measures from the US agencies. The report is right in the sense that most of the analysts are not very critical as to its reserves backing, apart from the Tether maximalist Bitfinexed, the pseudonymous Twitter account who examine each and every operation of the company.

While scrutinizing the hack of November last year where almost $31 million of USDT where stolen and consequently secluded by Tether, Bitmex pens: “The hacking incident demonstrated that Tether is effectively in complete control of the ledger, as they can force a hard fork at will and reverse any transaction…This raises the question of why Tether bothers to put the database on the Bitcoin and Ethereum blockchains at all — it would be far cheaper for Tether to create its own public database without needing to pay fees to the miners.”

Further, Bitmex Research remarks about the age-old question of transparency, noting, “Lack of transparency does not indicate fraud”. This corresponds to a recent report by security researcher Nicholas Weaver. Bitmex also coincides with Weaver that Tether is destined to struggle with issues in connections to money laundering and allegations of facilitating in criminal operations through the approval of anonymity that the service provides:

[Tether’s] characteristics potentially make it attractive to criminals, just like Bitcoin…Regulators are unlikely to be particularly happy about this and banks are likely to consider Tether with scepticism. Tether also requires the use of a bank, to hold the USD reserves required to back Tether. Many banks are therefore likely to be very cautious in respect of this issue and if Tether is accepted as a client, it may violate the banks’ compliance procedures such as rules meant to prevent money laundering.

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Tags: Bitmex Tether Vulnerable bitcoin

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