Tether versus regulators: who will win and what will happen to the crypto market – expert opinion

CONTENT

  • Experts are confident that legal proceedings with Tether will drag on for years

  • It’s time for the market to take a closer look at other stablecoins

  • Stablecoin USDT may repeat the fate of XRP

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How will the market react to the situation with Tether and what will happen to the cryptocurrency market if the problems of the USDT issuer worsen? Dealing with the experts

Today, January 15, Tether and cryptocurrency exchange BitFinex are due to submit reports on trade operations to the regulatory authorities. If the New York prosecutor’s office finds evidence of fraud on the part of crypto companies, then the issuer of the most popular stablecoin USDT faces legal proceedings and a high-profile scandal that could drag on for years. What will happen to USDT and how will the cryptocurrency market react? BeInCrypto editors found out what experts think.

Read also: Tether regulation will be an “apocalypse” for cryptocurrencies

Sergey Zhdanov, COO, EXMO cryptoexchange:

In the coming days, most likely, nothing global will happen. By January 15, iFinex should only complete the transfer of documents on mutual financial transactions Bitfinex and Tether to the Attorney General of New York .

According to the expert, much depends on the efficiency of the work of the Prosecutor General’s Office and when they publish the established facts. But even then everything will not be unambiguous until the court’s decision.

Read Also: What Bitfinex, Tether and US Regulators Didn’t Share – Review

“The main cause of concern for most market participants is that, if necessary, Tether will not be able to fully return their fiat collateral to USDT token holders. Moreover, back in April 2019, Tether admitted that their stablecoins – literally translated from English – “stable” coins – continue to gain popularity in the digital asset market. With … More is backed by fiat dollars only 74%. Nevertheless, trading on the market in tandem with USDT continues without noticeable distortions in its price, “Zhdanov added..

So far, the negative consequences fell more on the shoulders of Bitfinex than on stablecoin. In addition, the exchange reported at least partial reimbursement of debt to Tether..

The COO of EXMO is confident that regulators primarily want to bring iFinex to justice. They even resolved the issue of jurisdiction quickly and unambiguously, regardless of the fact that the company is registered in the British Virgin Islands. In addition, it is possible that, in addition to the accusations brought forward on the basis of the documents received, new.

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The whole story in this case has been going on for almost 2 years and the denouement is hardly worth waiting for in the next six months. In addition, the expert advises to follow not only the court decisions in New York. They can do even more harm = possible informational stuffing and emotional dispersal in the media in order to influence the market.

I think the main drawback of Tether from the point of view of American regulators is its non-accountability and the registration of the company itself outside the United States. In fact, this is a reason for increased attention from the authorities of any state..

Why regulators are up against stablecoins

Many countries of the world, including China, representatives of the EU and members of the G20, have already declared the unacceptability of the uncontrolled release of cryptocurrencies pegged to their national currencies..
States see this as a risk of issuing tokens that are not backed by anything in reality. That is, in essence, the uncontrolled emission of fiat in digital form.

See also: What are stablecoins and how they work

At the same time, stablecoins can pretend to be a means of payment and a method of transferring funds around the world. Other cryptocurrencies, including bitcoin, are recognized by states as a kind of valuable asset, stocks, goods, property, but not as full-fledged money for which trading can be conducted. It is through stablecoins as an analogue of fiat currencies that there is a risk of leakage of control of economic processes from traditional financial structures and states into third hands..

For this reason, neither Zuckerberg nor Durov was allowed to implement their stablecoin projects. Huge audience and the role of the Libra calculator In June 2019, Facebook announced preparations for the release of the Libra digital currency. The social network project immediately attracted attention … More or TON could lead to an accelerated development of events and the redirection of large cash flows.

In contrast to these two projects, Tether is still used to service trading in the cryptocurrency market, practically without leaving the exchange platforms. However, according to Zhdanov, the interest of regulators in the coin is quite justified:

One way or another, but this is the largest stablecoin. Sooner or later, questions should have arisen to him. There is a high probability that in the current format, Tether will not be allowed to continue working. Although as a result of USDT problems, there may be exchange rate distortions, but they will be short-term.

They still come to the cryptocurrency market for bitcoin and other digital assets. And Tether is not the only dollar stablecoin on the market for a long time. Many cryptocurrency exchanges have long ago issued their USDT counterparts. They will fill the void created by Tether rather quickly..

America takes matters into its own hands

According to the EXMO COO, those stablecoins that are issued by American companies with absolutely transparent reporting will be able to survive. The fact that under such conditions the US government is ready to allow such enterprises to operate has already been made clear. So, at the beginning of this year, the Office of the Comptroller of the Circulation (OCC) allowed national banks and federal savings associations to issue stablecoins. At the same time, since last year, American cryptocurrency companies began to receive banking licenses..

The current head of the OCC, Brian Brooks, is stepping down this week. The US Senate Banking Committee criticized his cryptocurrency decisions. With the arrival of Biden, the leadership of the US Securities Commission (SEC) also changes. It is expected that the policy of the Democratic team will be friendly towards cryptocurrencies, but we will get some clarity on this issue in the next month or two. Political changes could affect the course of litigation with Bitfinex and Tether.

In any case, it doesn’t appear that the US intends to ban stablecoins entirely. First of all, they are interested in keeping the dollar as the main reserve currency of the world. And then he has new competitors.

China is actively developing its digital yuanChina’s financial regulator has been working to create a digital asset for several years. During this time, a large number of … More appeared on the network, hoping not only to introduce its use within the country, but also to make it in the coming years a regional currency used in settlements with neighboring countries.

Released on blockchain, it is faster and cheaper in transactions. For this reason, the American authorities are interested in cooperating with cryptocurrency companies that can make the dollar competitive in the world of blockchain technology. By the way, in Europe they also started talking about the need to work together with private companies in the development and release of the digital euro.

In this context, the example of the already begun cooperation between the USDC and the US government is indicative. In November last year, it was announced that the USDC would be distributed among Venezuelan citizens in support of the politician Juan Guaidó, the expert added..

Too much money involved in Tether

Mikhail Bogdanov, CEO of Koshelek.ru believes that lawsuits can drag on for years, and after them others will follow, so it is unlikely that this will now lead to the closure of companies or bankruptcy.

If Tether and BitFinex are convicted of fraud, this could lead to a change in the denomination of currency pairs on exchanges and a redistribution of investor portfolios, which will greatly affect the market..

But the reputation of Tether and Bitfinex is falling every year, and this did not prevent the growth of turnover and distribution of USDT, there are alternatives, but they are not used so much. As a result, USDT now dominates the market so strongly that it is unlikely that it will be abandoned abruptly. The changes will be gradual, possibly taking years.

A complete ban is unlikely. USDT is a digital asset, so it will not be fully banned, the turnover will continue in any case. If any restrictions are imposed, then some institutional investors will have to reallocate their portfolios, which will lead to market movements. But to which one will depend on the degree and prevalence of prohibitions.

The case will drag on for years

Andrey Amris, UMI cryptocurrency ambassador advises not to count on the completion of the process around Tether and Bitfinex in the coming months.

I suppose that the process will end in one way or another with certain sanctions and fines in relation to Tether and Bitfinex. And this will inevitably hit the entire crypto market, provoking a collapse in rates, because USDT is still the main liquidity tool in the cryptocurrency market..

However, it is unlikely that the goal of the American financial authorities is to completely destroy this stablecoin, added Andrey Amris..

Rather, they want to take control of both the issue and all transactions with this digital asset. So, most likely there will be not only fines and restrictions, but also an amicable agreement, according to which Tether will be obliged to transfer information about large transactions, disclose financial information about bank deposits that provide USDT, strengthen KYC / AML.

There will be more blocking transactions that Tether considers questionable. And this will provoke a shift of users from USDT to decentralized stablecoins, which are less subject to the influence of national regulators and do not practice censorship in the execution of transactions..

USDT – a backbone element

USDT is the largest stablecoin on the crypto market. It is used as a counterpart to the US dollar on most trading floors. With its help, traders fix profits. USDT is also popular with entrepreneurs who make cross-border payments. USDT transactions are fast, easy and convenient. They are free of all the obstacles they face when making cross-border payments at banks..

Thus, USDT is a system-supporting tool for the crypto market. The crypto market will obviously react with a fall to the introduction of significant sanctions against Tether by American regulators.

The fall may be protracted – until the market finds another convenient instrument that can replace USDT. However, the more institutional money in cryptocurrencies, the less the crypto market is dependent on USDT, because institutions are unlikely to work with this stablecoin. They have the opportunity to purchase cryptocurrency on reliable OTC platforms using bank payments.

The expert also believes that the presence of institutional money will help the crypto market to contain the fall in the event of a collapse of the USDT. However, he considers this scenario unlikely..

There are no risks for the entire financial system, the cryptomarket is not yet large enough to somehow affect the global financial system. The risks of a complete ban on USDT exist, but seem unlikely to me. USDT will not be banned, it will be under the control of the American financial authorities. And users of the cryptomarket will lose the tool that guaranteed the execution of transactions.

As with banks, a transaction using USDT can be blocked at any time. And this will entail users leaving USDT.

I see this as a great potential for decentralized stablecoins, not subject to censorship and control even by the development team itself..

Scandals harm the crypto industry

Nikita Soshnikov, director of Alfacash emphasizes that the disclosure of documentation of mutual financial transactions of Bitfinex and Tether will play a key role in this case. It is this information that will be the answer to many questions about the USDT emission, which investors have been asking all this time..

The threat to the market is quite real and even somewhat underestimated. USDT turnover has reached serious proportions, and the full external audit of Tether has remained at the level of conversations. In any case, regulatory pressure and litigation are the worst that could happen to USDT, so a drop in the rate, delisting from the largest exchanges and a new wave of official negative statements will certainly have a tangible effect on the crypto market, the expert explains..

The collapse of USDT is unlikely to change the general perception of the potential of other stablecoins, he said. But the high-profile scandals in the USA with Ripple and Tether objectively harm the entire industry and provoke further tightening of regulatory requirements..

Power will prevail

Vladislav Utushkin, CEO of TTM Bank emphasizes that we are talking about centralized cryptocurrency projects, such as TON, Libra. Most likely, the litigation with Ripple, initiated by the US Securities and Exchange Commission, will also end in multimillion-dollar fines for the Ripple team..

No regulator can kill Bitcoin or, say, Monero. Therefore, I believe that the litigation with Tether and Bitfinex is likely to end with a full or partial victory of the American authorities. By a partial victory, I mean a situation when Tether becomes so regulated and subservient to the American authorities that in fact it will not differ much from banking products: transactions will be constantly blocked and users will logically begin the transition from USDT to decentralized stablecoins, which are less prone to censorship..

What is going on with Ripple XRP? Tether Could Cause a Crypto Apocalypse, BTC still going to zero?

The expert fears that the collapse of the USDT issuer will lead to a sharp drop in rates on the crypto market, because investors will try to get out of digital assets as soon as possible, or they will massively switch to bitcoin and freeze any trading activity … At the same time, this can lead to a fall in the crypto market, and the hardest hit will be the alts, which everyone will try to quickly merge. Bitcoin will sink less, but also strongly. 

However, I don’t believe in a complete collapse of the USDT. Rather, US regulators will force Tether to comply with all US law requirements for financial institutions, he added..

Until there is a court decision, USDT is unlikely to be banned. For the entire global financial system, this does not carry any special risks. Despite the fact that the crypto market reached $ 1 trillion recently, it is still very small compared to the global financial market..

USDT will be the same as XRP

Tether versus regulators: who will win and what will happen to the crypto market - expert opinion

Oleg Marchenko, trader at Binaryx believes that American regulators are quite capable of banning the coin, and the consequences will be the same as in the case of Ripple /

Let’s ask ourselves the question: “What will happen if the claim is satisfied and the regulatory authorities still prohibit the use of this token?” See what happened to the Ripple coin, even though it was not banned. It will be the same here. Fortunately, there are already enough stablecoins, and as soon as dominant pairs appear that will compete with USDT, capital will move in their direction..

He advises preparing in advance for the option that exchanges will begin to delink USDT..

Could USDT Be Banned? Of course it can. The United States is a country of high standards and rules, and will probably want to own such a tool and release some kind of its own crypto unit.

The expert highlight the following risks:

  • capitalization drawdown for all assets;
  • showdown with Bitfinex and USDT will affect everyone and all exchanges.

There will be more swings and cycles of drawdowns and ups. There is nothing critical, since USDT is not a flagship in the market and it certainly cannot be considered a fully decentralized asset..

The crypto market will still survive

Vyacheslav Demchuk, main founder of AMLBot and AMLSafe companies I am confident that the market will survive even if Tether and Bitfinex are found to be fraudulent. The crypto market is a market for being a self-regulating mechanism, so the disappearance of even such a large player will not destroy it. 

Let’s dig deeper and take a look at the evolution of the crypto industry in this vein. Why did Ethereum come about? It was conceived as a new platform for smart contracts based on bitcoin in order to neutralize its shortcomings. That is, relatively speaking, the bitcoin protocol began to perform poorly on certain tasks and the market immediately got a head start. The same thing happened with Ethereum and Tron, which was created to cope with the congestion of the Ethereum network and reduce transaction costs.

It’s all about shenanigans

Vladislav Pivnev, CEO of ICODA Agency believes Tether and Bitfinex will be the next targets of the SEC after Ripple. This is due to the fact that in just six months, the capitalization of Tether has doubled, from $ 12 to $ 24 billion. It is unlikely that the company managed to increase the supply of the token with real US dollars just as quickly.. 

All of this has given rise to well-founded concerns on the part of market players, and the SEC, which is known for its commitment to the safety of new financial assets, will act proactively..

Confidence in this is reinforced by the fact that in early 2018, under similar circumstances, the SEC already conducted proceedings regarding Tether. The bullish rally in Bitcoin, which we have seen last month, was caused, among other things, by the current situation around Tether and Bitfinex. Fearing the actions of the SEC and the adoption of the Stability Act (The STABLE Act), players began to massively transfer USDT to Bitcoin, heating up its price.

The expert emphasizes the systemic importance of stablecoin, which accounts for over 70% of cryptocurrency trading. 

If Tether and Bitfinex, which are affiliated through their major shareholders, are found to be fraudulent, there will be panic. Traders will buy Bitcoin at any price, BTC may for the first time in history exceed the $ 100,000 bar.

According to Vladislav Pivnev, USDC and DAI decentralized stablecoin will benefit from the investigation into Tether. An additional bonus for the market will be the increased transparency of stablecoin issuers, who will prefer to spread straw in matters of future relations with regulators.

The possibility of banning USDT should be considered minimal. The total dominance of Tether, which is under the control of the American financial authorities, creates a very convenient leverage for the United States to influence the cryptocurrency market.. 

Meanwhile, the traditional financial system is not threatened with turmoil. Despite significant growth in the last month, the total capitalization of the cryptocurrency market barely reaches $ 1 trillion. This is less than 1% of the total capitalization of traditional stock markets and is comparable to the cost of albeit expensive, but still separate companies – Apple ($ 2.2 trillion) Microsoft ($ 1.7 trillion) and Amazon ($ 1.6 trillion).). 

The squad will not notice the loss of a soldier

Viktor Suzdaltsev, COO, Cryptoexchange FREE2EX advises not to make an elephant out of a fly, considering that the significance of Tether is significant, but not critical.

Yes, Tether acts as a payment transport in many transactions, but their share in the global economy is insignificant. The scenario you described in the market, most likely, will not be reflected in any way. Yes, there will be victims, but the market itself will quickly reorient itself to USDC, DAI, TUSD and other similar instruments.

With regard to a complete ban, this possibility is unlikely. This possibility is unlikely. Regarding the risks, we do not know where exactly the USDT collateral is placed, because the most negative consequences will occur if the market finds out that it has been arrested, frozen or seized, the expert added.

The market will quickly find a replacement for USDT

Vyacheslav Orskiy, analyst of the new cryptocurrency exchange KickEX believes the US USDT ban will extend to other countries.

The case may come to a ban on the use of USDT cryptocurrency in the United States. The fact that the US economy occupies a leading position in the world and this ban can spread far beyond the states adds fuel to the fire..

In the situation with Tether and the USDT cryptocurrency, the consequences of the ban can be much more serious, since USDT is the main cryptocurrency for trading with other cryptocurrencies..

The main trading volume in most currency pairs is in pairs with USDT. In addition, USDT is still used by many platforms as a cryptocurrency to provide margin positions and positions in derivatives. The result of the USDT ban will be a decrease in liquidity in many cryptocurrency markets, which will result in increased volatility and high risks when performing trading operations with cryptocurrencies..

Most likely, this situation will not last long, and trading participants will use alternative stables, for example, USD Coin, TrueUSD, Binance USD, which will significantly add to their capitalization, which is now several times lower than that of USDT.

On the other hand, you can find a positive moment, especially for investors in bitcoin, the demand for which may increase, since BTC is the second largest instrument for buying other cryptocurrencies..

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Tether versus regulators: who will win and what will happen to the crypto market - expert opinion
Tether versus regulators: who will win and what will happen to the crypto market - expert opinion
Tether versus regulators: who will win and what will happen to the crypto market - expert opinion

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