Will your USDT explode? New York State approves multiple stablecoins but no USDT

Last week, the New York State Department of Financial Services (DFS) released a list of 10 custodial cryptocurrencies and 8 listed cryptocurrencies. The regulator explained: "Any licensed entity may use the cryptocurrencies on the list for its approved purposes." This means that exchanges do not need DFS approval to list these currencies, but only need to notify DFS.

The 10 cryptocurrencies are Binance’s USD stablecoin (BUSD), Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum Classic (ETC), Ethereum (ETH), GUSD, Litecoin (LTC), PAX Gold (PAXG), PAX USD stablecoin (PAX), and Ripple (XRP). Except for ETC and XRP, the other cryptocurrencies have been pre-approved for listing.

It is worth noting that this list includes three US dollar stablecoins, namely BUSD, GUSD and PAX, but not the most mainstream stablecoins USDT and USDC. Data shows that the top three stablecoins in terms of market value are USDT, USDC and DAI. PAX ranks fourth, BUSD ranks sixth, and GUSD ranks fifteenth. USDT occupies 80% of the market share, and the market value of USDC is about 1/10 of USDT.

USDT has become the most widely used cryptocurrency, ranking fourth in cryptocurrency market value, and will soon surpass Ripple to reach third place. The biggest obstacle to the development of USDT is regulation. Bitfinex and Tether, the issuers of USDT, have had trouble communicating with New York and US regulatory authorities. Zhao Dong, a small shareholder of Bitfinex, also believes that the US government's crackdown will become the main risk for USDT.

Before the New York Department of Financial Services released the whitelist, Bitfinex and Tether were facing multiple lawsuits. In April last year, New York prosecutors accused Bitfinex of secretly using Tether's reserves to compensate for $850 million (losses caused by hackers stealing coins). These charges stem from the allegations of the New York Police Department and the New York Attorney General. The Attorney General has obtained a court order prohibiting Bitfinex from withdrawing any more funds from Tether and requiring Bitfinex and Tether to hand over documents related to the investigation. The Attorney General believes that Bitfinex has misappropriated a large amount of customer and company funds and USDT.

Given the strained relationship between New York State and Tether, it is naturally impossible for the state to be included in the whitelist. The measures taken by the US government are likely to be huge fines.

In an interview with Planet Daily, DForce founder Yang Mindao believes that the investigation by the U.S. Department of Justice and the New York Attorney General may cause the operator of USDT to bear high fines or even go bankrupt. If the issuer of USDT is convicted, whether criminal or civil, it may face high fines. In addition, USDT is actually the product of the free market pricing of the U.S. dollar in the Chinese market . How long this "freedom" can last is also very uncertain. In fact, since the beginning of this year, due to the crackdown on money laundering by the People's Bank of China, rumors about USDT regulation have continued, but there is no good way. It may only be possible to exert pressure from the legal currency/USDT circulation channels, public opinion and other aspects.

On the other hand, under pressure, the issuer of USDT is gradually succumbing to regulatory pressure and starting to freeze some addresses. Tether said that the blacklisted addresses this year hold USDT worth $5.51 million to assist law enforcement agencies in their investigations.

If you want to wear the crown, you must bear its weight. USDT has the first-mover advantage, has been adopted by major exchanges and wallets, and has the diversity of being built on different chains. It is indeed convenient and easy to use, but its risks should not be underestimated.

Several compliant stablecoins approved by New York State are candidates that can be considered. Unlike USDT, they have basically been strictly audited, while USDT has not been audited so far. Among the three major exchanges that China is familiar with, in addition to BUSD under Binance, USDK under OK and HUSD under Huobi also publish audit reports regularly. It has become an industry practice to audit and issue reports for stablecoins. Any unaudited stablecoin needs to be considered.