A weight has been lifted from the world of digital assets – iFinex, the parent company of Tether and Bitfinex, has settled its longstanding lawsuit levied by The Office of the Attorney General of the State of New York (OAG).
Terms of the settlement will see Bitfinex pay an $18.5 million fine, while admitting no wrong-doing.
Originally filed on April 24, 2019, by the OAG, the aforementioned lawsuit put forth allegations that iFinex and its subsidiaries committed fraud through the misrepresentation of assets under its control. Simply put – Tether was marketed as being ‘backed’ on a 1:1 basis with USD, when this was not the case. This misrepresentation stemmed from a loan provided by Tether to Bitfinex, which was not disclosed to the public appropriately.
Due to the complexity of the case, and nascence of digital assets, it took almost a full 2 years to arrive at todays announced settlement. Part of this lengthy time frame was the result of delays due to the extensive amount of paperwork required – over 2.5 million pages.
An Important Step
As most know, Tether is a digital asset known as a stablecoin. This designation is used when describing the asset, as it is pegged to underlying assets such as USD – the goal of which is for Tether to mimic market movements of said assets.
Since its inception, Tether has been, and continues to be, an important lynchpin in the world of digital assets. It provides traders a safe haven from the volatility associated with the sector, and is the most readily accessible and supported stablecoin to date. Its loss would result in a significant reduction in overall market liquidity. If this suit were to have a negative ending, the ramifications would have spread like wildfire, greatly hurting an industry just now establishing itself as legitimate.
This importance has not alluded industry participants. Even investment firms such as JP Morgan have gone on record, underscoring the importance of Tether to the digital assets sector.
“Most Bitcoin trading occurs, not again fiat USD, but USDT…were any issues to arise that could affect the willingness or ability of both domestic and foreign investors to use USDT, the most likely result would be a severe liquidity shock to the broader cryptocurrency market which could be amplified by its disproportionate impact on HFT-style market makers which dominate the flow.”
With this lawsuit having been settled, digital assets can continue maturing, free of the potential ramifications of a negative outcome. So what does this maturation look like?
Since the lawsuit was first announced, various competitors to Tether have popped up. While they have managed to grow at a rapid pace, Tether has remained the ‘top-dog’ among stablecoins. Competitors currently vying for the title of largest stablecoin include, but are not limited to the following.
What should be interesting to see, is if the pace of adoption seen by these competitors remains strong. Due to the lawsuit, many industry participants became uneasy with using Tether. Now that it has been settled, will Tether begin to siphon off users of USDC, GUSD, etc.?
If Tether hopes to continue warding off stiff competition, it cannot sit idle – continual upgrades are needed. Thankfully for fans of the asset, such upgrades are actively in the works, headlined by coming support for the Lightning Network. As a second-layer protocol which offers potentially massive increases in efficiency, functionality, and more, the Lightning Network is a long anticipated upgrade.
Speaking with Paolo
For those looking to learn more about Bitfinex and Tether, make sure to peruse our past interview with Paolo Ardoino. As CTO of Bitfinex, he provides a unique insight into the company’s operations, and future goals for Tether.