Ripple’s CEO, Brad Garlinghouse, has expressed his belief that the United States government is actively targeting stablecoin issuer Tether, which could have unforeseeable consequences for the cryptocurrency markets. During a recent episode of the World Class podcast, Garlinghouse stated that there would undoubtedly be another black swan event in the crypto industry, similar to the collapse and subsequent exposure of fraud committed by FTX’s executives. While Garlinghouse did not provide further details or suggest that U.S. action against Tether would be the next black swan event, he did find the situation intriguing and worth monitoring closely. The Ripple boss considers Tether to be a vital part of the crypto ecosystem and admitted that he is unsure of the potential impact that U.S. regulatory measures against Tether could have. These comments from Garlinghouse come at a time when Ripple is making plans to launch its own stablecoin in 2024.
Tether Holdings, the parent company responsible for issuing and managing the world’s largest stablecoin, USDT, has faced scrutiny from U.S. politicians. In a letter to the Department of Justice in October 2023, Senator Cynthia Lummis and Representative French Hill urged a careful evaluation of the extent to which Binance and Tether are providing support to terrorism. Tether responded to the letter, emphasizing its cooperation with law enforcement and its commitment to working with authorities globally. Furthermore, it was reported in November 2022 that U.S. Attorney Damian Williams took over a Justice Department investigation into Tether’s alleged concealment of crypto-related funds from banks. Tether has also faced criticism for its lack of transparency regarding the reserves backing USDT. In response, the company has begun publishing quarterly third-party audits. Additionally, Tether paid a $41 million fine to the Commodity Futures Trading Commission in October 2021 for misrepresenting its reserve holdings.
Ripple is also preparing to launch its own stablecoin, backed by the U.S. dollar, later in 2024. Ripple’s chief technology officer, David Schwartz, has stated that the stablecoin will be supported by dollar deposits, short-term government Treasurys, and other cash equivalents. As the crypto industry evolves, concerns about stablecoins and their potential risks, such as depegging and bank runs, are becoming more prominent.