Facebook Urged to ‘Step Back’ by Senate while Tether Fined $42M by CFTC – Regulations Weekly

Facebook Concerns at the Senate

Since day one Facebook has experienced significant pushback towards its plans for releasing a digital asset and accompanying wallet.  With the recent launch of its Novi pilot-program, various U.S. Senators have taken the time to re-iterate their displeasure, urging Facebook to cease its actions.

In this letter the Senators did not mince words, speaking harshly on their belief in Facebook, based on the company’s track-record.  Not only do they touch on the potential financial instability that Facebook might bring with a digital asset, but its proclivity for placing profit above the well-being of the nation’s youth.  The following is an excerpt from this letter, summarizing the stance being taken by the Senators.

“Unfortunately, Facebook’s decision to pursue a digital currency and payments network is just one more example of the company “moving fast and breaking things” (and in too many cases, misleading Congress in order to do so). Time and again, Facebook has made conscious business decisions to continue with actions that have harmed its users and the broader society. Facebook cannot be trusted to manage a payment system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient.

We urge you to immediately discontinue your Novi pilot and to commit that you will not bring Diem to market.”

Lending Service Crackdown

For months now it has been clear that regulators were coming down hard on lending services within the United States with companies such as BlockFi, Nexo, and Celsius, having each experienced high levels of scrutiny.  The most recent example of this saw both New York Attorney General Letitia James announce that multiple lending platforms have been ordered to not only cease operations in the state within 10 days, but that various others were being investigated further.

“Cryptocurrency platforms must follow the law, just like everyone else, which is why we are now directing two crypto companies to shut down and forcing three more to answer questions immediately…My office is responsible for ensuring industry players do not take advantage of unsuspecting investors. We’ve already taken action against a number of crypto platforms and coins that engaged in fraud or that illegally operated in New York. Today’s actions build on that work and send a message that we will not hesitate to take whatever actions are necessary against any company that thinks they are above the law.” – Attorney General James

Celsius in particular has taken the time to address this issue, assuring its clients that it is not going anywhere.  The company states that it, “…has NOT received a cease and desist from New York state”, but rather a ‘request for information’.

Tether Fined

A controversial subject, predating the aforementioned scrutiny being placed on lending platforms, is the true backing of USDT.  Simply put, many have and continue to doubt the veracity of Tether’s claims that USDT has the backing it says it does.  This controversy is part of the reason which has allowed rivals such as USDC to steal away such a large share of the stablecoin market in recent months.

Unfortunately for Tether, the Commodity Futures Trading Commission (CFTC) was not convinced by its claims.  Days ago the regulator announced that it found Tether had made, “…untrue or misleading statements and omission of material fact in connection with the U.S. dollar tether token (USDT) stablecoin.” 

In coming to this conclusion, the CFTC levied and settled charges against Tether, with the company paying a $41 million fine.

With Tether playing such an important role within the digital asset sector, these continuing issues have also resulted in interest not only from regulators, but forensic financial research firms.  Hindenburg Research has just announced a, “…reward of up to $1,000,000 for information leading to previously undisclosed details about cryptocurrency “stablecoin” Tether’s backing.”

Essentially, Hindenburg Research does not believe Tether's claims, stating that it is determined to protect investors by exposing any fraud occurring behind the scenes.  Tether on the other hand has referred to this reward as both an ‘opportunistic’ and ‘pathetic’ attempt to profit.