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Tether finds strict scrutiny everywhere- US and Chinese regulators both get vigilant


Feb 13, 2018 Posted /  3510 Views


Tether finds strict scrutiny everywhere- US and Chinese regulators both get vigilant

US go vigilant on Tether

The year 2018 has not been a great for the cryptocurrency market, as the virtual currency space finds blow after blow. In yet another crisis to the cryptocurrency space, Tether, which has been pegged with the US dollar have now come under strict scrutiny of the American regulators. The commodities futures trading Commission (CFTC) of the country issued a subpoena to Tether and Bitfinex on December 6, 2017. The reports about the same surfaced in January that the currency and the exchange are both led by the same group of people who control both these companies from Hong Kong.

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It is anticipated that CFTC is examining if Tether has enough assets to back its claim of being an equivalent cryptocurrency to US dollars. The company had issued some $2.2 billion of Tether Tokens on this Friday and if it does not have at least the same amount of cash, then it would just present great losses to the investors as the company in that case would not be able to guarantee its 1-to-1 conversion ratio.

Governance Structure  and Chinese affiliation

There have been continuous inquisitions about the Tether’s governance structure. It is not clear as to why the company cut its ties with its Audit firm and even CFTC has not been able to disclose the exact findings about the company. However, it is sure that trading in Tether coins may go down as its reputation has been damaged a lot. The company is specifically popular in China, where most investors are using it to fly their income from the authorities taxation radar. Most of the Tether tokens are affiliated with Chinese exchanges based in Hong Kong and elsewhere.

In an effort to keep off investors from indulging in speculative opportunities, the Chinese authorities pushed for the closure of the virtual currency exchanges in the country. This left with Chinese cryptocurrency lovers to find new ways to invest in exchanges outside the borders of China such as in Hong Kong. However, the authorities say that they can still scrutinize the investors for buying bitcoins or other digital currencies with Yuan.

In the last few days, Chinese authorities focused mainly on bitcoins and leading currencies while they did not pay attention to Tether because it has a fixed rate and is less tentative in nature, commented Daisuke Yasaku of the Daiwa Institute of Research to the media. Further Yasaku suggested the investors could first convert their yuan into "tethers," which they then use to buy bitcoin and other coins. According to the Yasaku, investors and exchanges are trading "using methods that leave no records”.

Tether's market capitalization surged as it circulated millions of tokens subsequent to China's crackdown last year. Beijing after that has turned more watchful to the issuance and use of Tether. Chinese state media reported on Feb. 4 that authorities would start scrutinizing offshore exchange operators. This could further lead to sluggish trading in Hong Kong and elsewhere. Approximately 20% of bitcoin trading was reckoned with the yuan in the last fall, according to cryptocurrency information site Coinhills. The statistics has plunged to less than 1%. However, the Chinese currency is still expected to have finished its way into the market through Tethers.


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Tags: Tether Chinese affiliation market capitalization Chinese currency

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