Coinbase reignites Tether debate by listing controversial stablecoin

Coinbase Pro will list controversial stablecoin Tether (USDT) next week — and crypto traders in New York won’t be allowed anywhere near it.

The NASDAQ-listed exchange said it’s now open to inbound USDT transfers, but only for Tethers issued on the Ethereum blockchain.

Coinbase Pro expects Tether trade to go live Monday evening (April 26) if traders deposit enough USDT (so the markets have liquidity).

If all goes to plan, Coinbase Pro will support USDT trade across Bitcoin, Ethereum, and the exchange’s own dollar-backed stablecoin USDC.

“Support for USDT will generally be available in Coinbase’s supported jurisdictions, with the exception of New York State,” said the company in a blog post.

There’ll also be fiat markets for US dollars, British Pounds, and Euros. 

Coinbase plus Tether is a head-scratcher for pundits 

Some industry insiders consider Coinbase listing USDT as further proof of Tether’s trustworthiness moving forward.

However, Tether’s role in crypto markets persists as a focal point for both critics and financial regulators. 

Tether (and its affiliated companies) has long struggled with transparency, and is yet to provide full audits of its asset reserves purportedly backing USDT.

• Tether long claimed to be fully backing USDT one-to-one with US dollars.
• The company’s lawyer later adjusted that statement to ‘74%-backed.’
• USDT is now said to be backed by a mixture of cash and other investments.

There’s also Tether’s settlement with the New York Attorney General (NYAG) office from earlier this year. This effectively cut New York investors off from handling USDT.

We're ending @bitfinex and @Tether_to's virtual currency trading in New York after the companies covered up about $850 million in losses around the globe and deceived the market by overstating reserves.

Those trading virtual currencies in New York cannot avoid our laws, period.

— NY AG James (@NewYorkStateAG) February 23, 2021

NYAG charged Tether’s parent iFinex (which also owns crypto exchange Bitfinex) with mixing customer funds into its own to conceal $850 million in losses.

The company said it fell victim to a fraudulent third party.

The US Department of Justice has also been investigating Tether and its related firms for potential market manipulation since 2018. 

I actually think it's a terrible move and injects systemic risk right into the heart of crypto.

— Palley (@stephendpalley) April 22, 2021

[Read more: Coinbase is big — but can it be Amazon big?]

In any case, iFinex must now submit regular financial attestations to the NYAG’s office, the first of which are due next month.