Tether and Its Dubious Practices: A Deep Dive into the Controversy
Tether (USDT), launched in 2014 by Tether Limited, is the world’s largest stablecoin by market capitalization, boasting over $139 billion as of early 2025. Pegged to the U.S. dollar at a 1:1 ratio, USDT has become a cornerstone of the cryptocurrency ecosystem, facilitating trading, liquidity, and cross-border transactions. Yet, despite its ubiquity, Tether has long been shrouded in controversy, with critics labeling it a potential scam and a ticking time bomb for the crypto market. This article explores the dubious practices that fuel these accusations, examines why so many people and entities view Tether with suspicion, and delves into the irony of its ardent support from Bitcoin maximalists and OG crypto enthusiasts—freedom lovers whose ideology seems at odds with Tether’s centralized nature. Finally, we’ll address the European Union’s Markets in Crypto-Assets (MiCA) regulation and Tether’s apparent refusal to comply, a decision that could reshape its future in one of the world’s largest markets.
The Dubious Practices Fueling Suspicion
Tether’s reputation as a dubious entity stems primarily from its lack of transparency and a history of regulatory run-ins. At the heart of the controversy is the question of whether USDT is fully backed by U.S. dollar reserves, as Tether Limited has repeatedly claimed. For years, the company resisted calls for a comprehensive, independent audit, instead releasing attestation reports—less rigorous reviews conducted by accounting firms like BDO Italia. Critics argue these reports fall short of proving that Tether holds sufficient reserves to redeem all circulating USDT tokens, a concern amplified by the stablecoin’s massive scale.
In 2021, the U.S. Commodity Futures Trading Commission (CFTC) fined Tether $41 million for misleading statements about its reserves. The CFTC found that between 2016 and 2018, Tether misrepresented that USDT was fully backed by fiat currency when, in reality, its reserves included unsecured receivables and non-fiat assets. This revelation confirmed long-standing suspicions and eroded trust among skeptics. More recently, Tether has claimed to maintain excess reserves—$5.3 billion as of mid-2024—yet the absence of a full audit by a top-tier firm continues to fuel doubts. Industry observers, including crypto influencer Edward Farina on X, have pointed out that “less than 30% of their USDT [is] backed by real dollars,” though Tether disputes such claims, asserting its financial health with over $11.9 billion in net equity.
Another point of contention is Tether’s opaque corporate structure. The company is registered in the British Virgin Islands, a jurisdiction known for lax financial oversight, and its leadership—CEO Paolo Ardoino and other executives—rarely engages in public scrutiny. Farina has noted that “the CEO doesn’t do public interviews,” a stance that contrasts with the transparency expected in traditional finance and even some crypto projects. Reports of Tether’s ties to Bitfinex, a cryptocurrency exchange with its own regulatory troubles, further muddy the waters. A 2019 lawsuit by the New York Attorney General alleged that Tether and Bitfinex commingled funds to cover an $850 million loss, a claim settled in 2021 with an $18.5 million fine and a mandate for quarterly reserve disclosures—yet skepticism persists.
Tether’s role in market manipulation is another frequent accusation. Critics, including some financial analysts, allege that USDT issuance correlates suspiciously with Bitcoin price surges, suggesting Tether may be artificially inflating the market. A 2018 study by University of Texas researchers posited that Tether was used to manipulate Bitcoin prices during the 2017 bull run, though Tether and Bitfinex have denied these claims. The lack of definitive proof hasn’t quelled the narrative, especially as Tether’s dominance—fueling nearly 90% of Bitcoin trading volume, according to some X posts—makes it a linchpin of the crypto economy.
Why People and Entities Think It’s a Scam
The perception of Tether as a scam arises from a combination of its operational secrecy, regulatory penalties, and the catastrophic potential of a reserve shortfall. For everyday users, the fear is simple: if Tether cannot redeem USDT at $1 per token, a bank-run scenario could collapse the stablecoin and ripple through the crypto market. Institutional players, like JPMorgan, have warned in reports that Tether’s opacity poses systemic risks, especially given its size—three times larger than its closest competitor, Circle’s USDC.
Public sentiment, as reflected on platforms like X, often amplifies these concerns. Influencer Jacob Kinge recently posted, “Tether, an unaudited scam created by maxis… the entire [Bitcoin] price is fake and manipulated,” echoing a view held by detractors who see Tether as a house of cards. Regulatory bodies, too, have taken a dim view. Beyond the CFTC fine, the U.S. Department of Justice has reportedly investigated Tether for potential bank fraud related to its early operations, though no charges have been filed as of March 2025. Meanwhile, reports of USDT’s use in illicit activities—such as Russian networks allegedly leveraging it for sanctions evasion—add to the perception of a rogue actor, despite Tether’s efforts to freeze misused funds and condemn such activities.
The Irony of Bitcoin Maximalist Support
Perhaps the most perplexing aspect of Tether’s story is its staunch backing from Bitcoin maximalists and OG crypto enthusiasts—self-described freedom lovers and antistate advocates who champion decentralization. Bitcoin, born from Satoshi Nakamoto’s vision of a trustless, peer-to-peer currency, embodies an ethos of autonomy and resistance to centralized control. Tether, by contrast, is a centralized stablecoin, issued and managed by a private company with little accountability to its users. This contradiction is glaring: how can proponents of Bitcoin’s libertarian ideals embrace a tool so antithetical to its principles?
The answer lies in pragmatism over ideology. For Bitcoin maximalists, USDT is a necessary evil—a liquid bridge between fiat and crypto that fuels trading and adoption. Without Tether’s stability, Bitcoin’s volatility would make it less practical for real-world use, and exchanges would struggle to offer the trading pairs that drive market growth. As Kinge’s X post suggests, “nearly 90% of all BTC demand is fueled by Tether,” a dependency that underscores its utility despite its flaws. This mindset prioritizes Bitcoin’s dominance over philosophical purity, even if it means propping up a centralized entity that could undermine the market’s integrity.
Yet, this alliance is not without tension. Critics within the crypto community argue that Tether’s risks—its potential to fail or be banned—threaten Bitcoin’s credibility. If Tether collapses, the fallout could tank Bitcoin’s price and erode trust in the broader ecosystem, a scenario maximalists dismiss as unlikely given Tether’s profitability ($5 billion in net profits in the first half of 2024, per CEO Ardoino). Still, the irony remains: a movement built on distrust of institutions has hitched its wagon to one of the least transparent players in crypto.
MiCA Regulation and Tether’s Non-Compliance
The European Union’s Markets in Crypto-Assets (MiCA) regulation, fully effective as of December 30, 2024, represents a seismic shift for stablecoins like Tether. MiCA imposes strict requirements on issuers: licensing as electronic money institutions, maintaining reserves in regulated banks, and providing regular audits and transparency disclosures. Aimed at protecting consumers and ensuring financial stability, MiCA has already prompted exchanges like Coinbase and Crypto.com to delist USDT in Europe, citing its non-compliance.
Tether’s refusal to align with MiCA is deliberate. CEO Paolo Ardoino has criticized the regulation, arguing it introduces “systemic risks” by mandating that stablecoin issuers hold over 60% of reserves in bank deposits—funds banks can then lend out, potentially destabilizing the peg. Rather than adapt, Tether has pivoted to MiCA-compliant alternatives, investing in euro-pegged stablecoin issuers like StablR and Quantoz while halting its own EURT stablecoin. This strategy suggests Tether prioritizes its existing model—opaque but profitable—over bending to European demands.
The consequences are unfolding. Binance announced plans to delist USDT for European Economic Area users by March 31, 2025, though custody and transfers remain permissible under MiCA, per the European Securities and Markets Authority (ESMA). Crypto influencer Densweb3 posted on X, “Tether’s days in Europe could be numbered under new MiCA rules… What’s next for Tether? To slowly fade out?” The lack of clarity from EU regulators—ESMA has neither confirmed nor denied USDT’s compliance—leaves exchanges in limbo, but the trend is clear: non-compliant stablecoins face exclusion in Europe.
For Tether, losing Europe could dent its dominance, though its focus on Asia, where most trading volume occurs, may mitigate the blow. Still, MiCA highlights a broader challenge: as regulators worldwide tighten oversight, Tether’s resistance to transparency could isolate it from key markets, amplifying the scam narrative.
Conclusion: A Polarizing Giant
Tether’s story is one of paradox—a stablecoin indispensable to crypto’s growth yet perpetually shadowed by doubt. Its dubious practices—unverified reserves, regulatory fines, and market manipulation allegations—feed a perception of it as a scam, one shared by users, analysts, and regulators alike. The irony of its support from Bitcoin maximalists underscores a pragmatic compromise within a movement rooted in idealism, while MiCA’s crackdown in Europe tests Tether’s adaptability.
Whether Tether is a scam or merely a flawed giant remains unproven. Its financials suggest resilience, but its opacity invites disaster. As the crypto landscape evolves, Tether’s fate may hinge on a choice: embrace transparency and regulation, or double down on its current path, risking irrelevance—or collapse. For now, it remains a polarizing force, loved and loathed in equal measure, and a litmus test for the industry’s future.