This is something that the entire Bitcoin community needs to worry about because all signs are showing that there’s a high likelihood that Tether will be forced to cease all of their operations in the United States at some point in the future.
Some may be tempted to respond by saying, “There’s no proof that Tether isn’t backed by real reserves!”
For those thinking this, please understand that this article has nothing to do with whether Tether is actually backed with a legitimate 1:1 reserve ratio to all of the tokens that they have issued over the last year. The main problem here is that Tether is essentially issuing a security.
But Everyone is Issuing One!
The difference here, however, is that Tether has been issuing a security for the last year instead of over the course of a few weeks like most ICOs have. The specific security that Tether has issued is based on the U.S. dollar, which puts them squarely in the crosshairs of the Department of Justice (potentially) for other potential violations of federal law.
Also, Tether has also printed approximately $2.5 billion worth of Tether tokens since they first began issuing them and they are already on record for receiving a subpoena from the CFTC. This information was released on January 30, 2018, and Tether has yet to issue a refutation of the report at the time of writing.
How is it a Security?
Below, is the formal definition of the term, ‘security,’ as defined in Section 2(a)(36) of the 1940 Securities Act passed in the United States.
What Could the U.S. Do Against Tether?
In order to get a better idea of how/what the United States would do in the event that they do decide to apprehend Tether Limited for their printing of unauthorized securities in the form of tokens that are tethered to the United States’ currency, one must examine the case study of a ‘Liberty Reserve.’
“Liberty Reserve was a Costa Rica-based centralized digital currency service that billed itself as the ‘oldest, safest and most popular payment processor, serving millions all around the world.’”
It also asserted that “the site had over one million users when it was shut down by the United States government. Prosecutors argued that due to lax security, the alleged criminal activity largely went undetected, which ultimately led to them seizing the service.”
What people should take away from this article is that Tether being backed legitimately one-to-one is neither here nor there at this point. Even if they were 100 percent correct in their claim that they’re backed by the United States’ dollar completely, there is still a significant possibility that they, at the very least, are forced to pay very hefty fines for their failure to abide by the SEC’s regulation and federal guidelines.
When the shoe drops on this case, there could be a substantial shake-up in the cryptocurrency sphere.