Compass Investments

– Ripple CEO Brad Garlinghouse said it is “clear” that the U.S. government is “targeting” Tether, a Stebricoin issuer, and could have an unpredictable impact on the cryptocurrency market.

Garlinghouse said in a May 10 interview on the World Class podcast that “100 percent” another cryptocurrency-related event, such as the collapse and subsequent publication of the fraud perpetrated by FTX executives, would be a “black swan.”

The U.S. government will go after Tether, that’s clear,” he said, but did not elaborate or name possible U.S. action against Tether as the next “black swan.” Instead, he called the situation “interesting to watch.”

I view Tether as a very important part of the ecosystem,” the Ripple chief said. He added that he did not know how potential action by U.S. regulators against Tether would affect the cryptocurrency ecosystem.

Garlinghouse’s comments come as Ripple plans to launch its own stablecoin later this year.

Tether Holdings Limited, the parent company of a number of similarly-named subsidiaries listed around the world, is responsible for various operations for issuing and managing the world’s largest coin by market capitalization, the Tether (USDT) steiblcoin.

Last October, U.S. Senator Cynthia Lummis and Congresswoman French Hill urged the DOJ in a letter to “carefully assess the extent to which Binance and Tether provide material support and resources in support of terrorism.”

In response to the letter, Tether said it has “always assisted law enforcement” when asked and that it is “fully committed” to continuing to cooperate with authorities around the world.

In November 2022, Bloomberg reported that Manhattan District Attorney Damian Williams led a DOJ investigation into Tether, which allegedly hid cryptocurrency-related funds from banks used for cash transfers.

The company has also been criticized for its lack of collateral transparency, with third-party treasuries auditing USDT collateral on a quarterly basis in recent years.

In October 2021, the company paid a $41 million fine to the Commodity Futures Trading Commission (CFTC). The Commission found that Tether “misrepresented its fiat currency reserves” and that between June 1, 2016, and February 25, 2019, on “only 27.6% of days” fiat reserves were sufficient to back USDT.