Superfriends of the US dollar — led by Treasury secretary Janet Yellen — met earlier this month to talk about what’s to be done with stablecoins Tether and Diem, reports Bloomberg.
Federal Reserve chair Jerome Powell, SEC chief Gary Gensler, and acting CFTC boss Rostin Benham joined Yellen under the White House’s so-called Working Group on Financial Markets.
The closed-door meeting plants Tether and Diem in direct sight of nearly all major regulatory entities in the US and ensures months of speculation over potential outcomes.
According to Bloomberg, the former’s massive commercial paper portfolio was the heart of matters discussed, whether it brings systemic risk to the commercial paper ecosystem.
As for Diem, Yellen and co. were said to be worried of failing to impose proper stablecoin regulation before Facebook’s billions-strong user base can access Zuckerberg’s offering.
Tether, a crypto money market
Commercial paper is similar to corporate debt; companies sell it to raise short-term funds.
At March’s end, the cash equivalent asset made up about half of Tether’s $60 billion reserves, which would make the company the seventh largest commercial paper whale in the world.
Tether has continually tried to supplement its pie charts with glowing reviews from exchange operators and other institutional traders as proof of its transparency.
Still, no one knows which companies issued Tether’s commercial paper, nor has anyone seen Tether active in commercial paper markets (the company uses an intermediary for those purchases, Tether said to CNBC recently).
So, participants of the Working Group’s shindig reportedly felt USDT’s commercial paper ploy echoes an unregulated money market mutual fund.
Players can borrow tokenized capital (USDT) from Tether for use within the crypto ecosystem outside of pesky regulatory oversight — great when sentiment is high but risky when investors return to cash in their chips.
Transparency brings white hot heat
All this throws the Office of the Comptroller of Currency (OCC) into the mix of law and regulatory agencies of which Tether should be wary, alongside FinCEN, the IRS-CI, the DoJ, the SEC, and ultimately the FBI.
The OCC oversees all banking activity within the US (local and foreign institutions) and could threaten Tether’s banking partners into submission if pushed.
Of course, all the scrutiny comes in the wake of Tether’s $18.5 million settlement with the New York Attorney General earlier this year, and amidst a reported DoJ criminal probe into the company’s execs over potential bank fraud.
Indeed, the heat surrounding Tether seems to rise along with its attempts at transparency.
All eyes are no doubt on the company’s next set of pie charts — while American three-and-four letter agencies cluck their tongues and stroke their beards about Tether’s cocky stride and musky odour.