Tether’s USDT Stablecoin Depegs from US Dollar on Exchanges After Company Froze $435M
Tether’s USDT, the largest stablecoin by market capitalization, has depegged from its intended $1 price due to controversy surrounding the company’s wallet-freezing policy in collaboration with law enforcement agencies. Major exchanges like Binance, Coinbase, and Kraken have seen USDT dip as low as $0.985, indicating a deviation from its dollar peg.
USDT Depeg Caused by Cooperation with Authorities
Tether sent a letter to Senator Cynthia M. Lummis and Congressman J. French Hill revealing that it had frozen crypto wallets holding over $435 million in USDT tokens on requests from government agencies. This demonstrates Tether’s collaboration with authorities to combat criminal activity involving USDT.
Tether maintains that it works with agencies to counter illicit financial activity, but its neutrality as a stablecoin issuer is now being questioned after the asset freeze.
Scrutiny of Tether’s Growth Also Intensifies
In addition to the wallet freeze, concerns have been raised about Tether’s supply expansion in 2023. Data from Messari shows that USDT’s market cap crossed $90 billion this year, with Tether minting around $23 billion new USDT. Some investors see this growth as problematic and believe Tether may be minting unbacked USDT to manipulate Bitcoin prices and prevent redemption into dollars.
The combination of supply explosion and compliance with authorities appears to be eroding confidence in Tether, leading to the depegging of USDT on exchanges.
Hot Take: Faith in Tether Shaken as USDT Depegs
Faith in Tether’s policies is being shaken by the recent depegging of USDT from the US dollar. The instability of USDT could have a ripple effect on the broader crypto market, which heavily relies on USDT liquidity. Rival stablecoins like USDC may gain ground as doubts about the future of USDT persist. Only time will tell if USDT can regain its dollar peg.
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