Cryptocurrencies are facing many risk factors including: pending regulatory clampdowns; higher rates of crypto use by criminals; non-sustainable consumption of electricity; increasing incidence of security breaches on crypto exchanges; government bans of crypto use; ransomware attacks to be paid in crypto; rug pulls by fraudulent founders and developers…etc.

But could the biggest threat to the industry actually come from the biggest stablecoin by market capitalization – namely (USDT)? Several dozen Reddit users seem to think so, in response to this post titled – Tether: The Biggest Risk of Cryptocurrency – that was published Sunday in the CryptoCurrency subreddit.

It cites 24 examples of questionable conduct by Tether developers, founders and leaders since 2014. The article also draws correlative price increases between and Tether, which the writer claims links them – so if one falls in price, it’s likely they both will somehow fall. The piece also notes that Tether has total assets of $75 billion and only 25 employees – the employee number couldn’t be verified on the Tether.io website – but if true, that might make it easier to collude and commit fraud. The article provided no evidence beyond circumstantial and personal anecdotes.

Here’s some background information: This is a list with recent anti-Tether articles from mainstream media.

• Articles stating that less than three percent of USDT’s assets are pegged to U.S. dollars, with the majority actually pegged to riskier commercial bonds.
• Reports of U.S. Treasury Secretary Janet Yellen’s remarks that stablecoins such as USDT pose a “systemic risk” to the current monetary system.
• Stories trumpeting the settlement of New York State’s Attorney General against Tether for nearly $19 million to end a probe that alleged a stablecoin coverup of more than $800 million in losses.
• Media coverage asserting that a “run” on exchanges to convert stablecoins such as USDT to U.S. dollars will bankrupt issuers causing a repeat of the 2008 financial crisis.
• As well as the latest chatter around the Department of Justice’s allegations of criminal conduct against certain former executives at Tether.

These stories – combined with the Reddit post – seem to create a cascade of chaos and corruption for the fourth-largest cryptocurrency by market cap. Financial commentators and industry analysts seem worried that this USDT criminal case could bring down the entire crypto sector – but here are some things we need to remember.

USDT might seem like the sole stablecoin, but USDT has fungibility thanks to Binance USD, Dai and other staked assets projects.

Furthermore, even if criminal or civil financial penalties are levied against Tether, it’s likely to reach a negotiated settlement well before it reaches a conviction. There’s simply too much at stake for that organization to stonewall the Department of Justice. The allegations against the former executives will never go to trial, that’s why plea bargains exist.

And lastly, Secretary Yellen and Federal Reserve bankers are bashing stablecoins for one reason – the government’s monetary monopoly is threatened. For the government to say stablecoins are a “systemic risk” to the existing money system is laughable. Quantitative easing, reckless deficit spending and runaway money printing are all greater threats.

For the record, bad actors, criminal acts, and fraud are not permitted in the cryptocurrency-space. But it’s very unlikely that the Tether investigation and potential criminal prosecution will result in far-reaching ramifications for broader cryptocurrencies.

Here’s The Flipside

• Could the flames against USDT be fanned by the Digital Currency Group conglomerate which owns CoinDesk, Coinbase (NASDAQ:), and Circle as well as Circle’s stablecoin USD Coin (USDC)?
• Circle, which announced its intention to go public in a SPAC transaction a few months ago, had a target initial public offering (IPO) of almost $5 billion.

Why you should care

Circle’s USDC has been the fastest-growing stablecoin of 2021, but it’s still second behind USDT in market cap. Tether was hounded by negative media at the worst time possible for a Circle IPO.

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