Former CFTC Chairman: Destroying the value of USDT for cryptocurrency could equate to breaking face value
According to former Commodity Futures Trading Commission (CFTC) chairman Timothy Massad, the value of the USDT stablecoin being destroyed could be disastrous for the broader crypto market.
Timothy Massad – Former Chairman of the US Commodity Futures Trading Commission
According to the Bloomberg On Monday, Massad compared it to the Reserve Primary Fund’s “breakthrough of par” in September 2008, the day after Lehman Brothers filed for bankruptcy, assuming the value of the USDT would fall below $ 1. The net asset value (NAV) of the $ 65 billion fund, which holds Lehman commercial paper among its assets, has fallen below $ 1 per share, which has escalated demand for withdrawals and money market funds.
In the crypto market, a stablecoin like USDT (which is pegged to the US dollar) is the equivalent of a money market fund, and investors should be concerned that its value could also drop below $ 1, according to Massad.
Potential liquidity shock
Tether recently announced that as of March 31, only about 10% of its assets were cash, reverse repo and Treasury bills. With the majority of USDT-backed assets not in fiat, Massad said USDT holders are “being told that they may have trouble getting their $ 1 per token back”.
So the question is whether Tether can withstand the sudden wave of withdrawals and what impact this will have on the broader crypto ecosystem. A recent research report by JPMorgan stated that the loss of confidence in Tether will “likely cause a severe liquidity shock” to the Bitcoin market, as 50-60% of BTC transactions are in Bitcoin (USDT).
Massad recalled that tether is “an important part of the global approximately $ 2 trillion market” as traders “use it to quickly move the dollar value between exchanges to seize opportunities.” Arbitrage when there isn’t one Bank transfer there.
A drop in liquidity will cause cryptocurrency prices to fall, squeezing those with leveraged positions.
According to Massad, the regulation of stablecoins needs to be strengthened. He mentioned a bill that was to introduce December Congress will require stablecoin issuers to be subject to the same regulations and standards as banks.
“Whether it goes forward or not is everyone’s guess.”
At home at home
According to Coindesk