Tether's Reserves & Transparency

On October 15, 2021, the Commodity Futures Trading Commission (CFTC) issued a consequential order against Tether and Bitfinex, citing misleading statements made since their inception in 2014. These statements, according to the CFTC, falsely claimed that USDT was fully backed by U.S. dollar reserves, violating both the Commodity Exchange Act (CEA) and CFTC regulations.

In light of these findings, Tether was ordered to pay a substantial penalty of $41 million for false claims. Additionally, Bitfinex was penalized $1.5 million for engaging in unauthorized commodity transactions on its trading platform.

The penalties stemmed from CFTC's discovery that Tether had misrepresented the security of its stablecoin to the market and its customers, primarily between June 1, 2016, and February 25, 2019. During a thorough investigation covering a 26-month period from 2016 to 2018, it was revealed that Tether had only backed 27.6% of the circulating USDT tokens with fiat reserves at any given time.

To enhance transparency, Tether now regularly updates the reserve status of USDT on its official website. This move ensures that current and potential users can readily access and assess the reserve backing of USDT and Tether's other stablecoins, such as MXNT, XAUT, CNHT, and EURT, thereby promoting greater trust and accountability.