The cryptocurrency world has been shaken by recent developments involving Tether (USDT), a dollar-pegged stablecoin that prides itself on transparency. However, its reputation took a hit when Friedman LLP, its long-time auditing firm, abruptly terminated their relationship. This incident has raised serious questions about the legitimacy of Tether’s $2.24 billion market capitalization.
What Happened Between Tether and Friedman LLP?
Tether Group, closely affiliated with the Bitfinex cryptocurrency exchange, released an official statement explaining the split:
"We confirm that we have severed ties with Friedman LLP. Given the firm’s excessively detailed procedures for auditing Tether’s relatively simple balance sheet, it became clear that completing the audit within a reasonable timeframe was impossible. As the first company to undergo this process, there were no precedents or benchmarks to measure its success."
Despite the breakup, Friedman LLP remained temporarily to verify Tether’s cash reserves and ensure the 1:1 USD backing of issued tokens. But skepticism persists.
The Red Flags: Trading Volume vs. Market Cap
Data reveals an alarming discrepancy:
- 24-hour trading volume of USDT surpassed its total market cap.
- This suggests that some USDT transactions were unaccounted for in the valuation.
Industry Reactions:
- Noam Copel (CEO of DAV) voiced concerns:
"Tether must clarify the reasons behind its market cap surge and prove it holds equivalent USD reserves. The lack of transparency isn’t just a warning to USDT investors—it’s a wake-up call for the entire crypto community." - Dejun Qian (Fusion Foundation) added:
"If real-world assets are mapped onto blockchains, custodial, auditing, and legal frameworks become critical. Right now, centralized institutions are indispensable for trust."
A History of Controversies
This isn’t Tether’s first brush with controversy:
- November 2017: $31 million in USDT was stolen by hackers.
- Ongoing Doubts: Critics question whether Tether holds the USD reserves it claims. The company dismisses these claims as "ignorant and baseless," but the debate rages on.
FAQs
Q1: Why did Friedman LLP stop auditing Tether?
A1: According to Tether, Friedman’s overly complex audit process couldn’t be completed in time.
Q2: Is USDT still backed 1:1 by USD?
A2: Tether insists it is, but without independent audits, confidence is eroding.
Q3: How does this affect other cryptocurrencies?
A3: As a major stablecoin, USDT’s instability could ripple through markets, impacting Bitcoin and altcoins.
👉 For more on how transparency issues affect crypto markets, explore expert insights here.
Sources: Investing.com | Analyst: Tanzeel Akhtar
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