Text丨Wu Yan

The U.S. supervision of Tether, the issuing company of USDT, is still ongoing.

Half a month ago, there were rumors on the Internet: "USDT will disappear, and the three major exchanges are in danger of closing down" rumors spread on the Internet.

Rumors say that the United States requires TEDA to provide proof before July 22. If the proof fails, TEDA will close its doors at the end of this month.

This news is a misunderstanding: the Attorney General’s Office of the New York Department of Justice is prosecuting Bitfinex, but neither Tether nor its affiliated company, Bitfinex, is registered in New York. Supervision.

Shah Hafizi told Deep Chain Finance: The purpose of the hearing is that the court will review the case based on evidence and make a judgment based on relevant laws. If Bitfinex loses the case, it will have to pay a fine and close its operations in New York.

On July 20th, as a shareholder of Bitfinex, Zhao Dong responded to the rumors on Weibo: "You can really spread rumors. Give me all the USDT you don't want, and we will accept it."

On July 22, local time in the United States, the Office of the Attorney General of New York has provided evidence to the "Bitfinex and Tether" company, and a hearing will be held on July 29.

Zhao Dong told Shenlian Finance and Economics that the evidence presented is true, but (the New York Attorney General's Office) has no real hammer.

Shah Hafizi told Deep Chain Finance that usually before the hearing, the New York Attorney General's Office needs to submit relevant evidence at the evidence meeting so that the accepting party (court) can understand the facts of its case.

Half a month ago, THE BLOCK reported that the New York Attorney General’s Office claimed that they had obtained more evidence that the Bitfinex trading platform was still available to New York traders at the latest in 2019, and the New York Attorney General’s Office also presented its private investigation to the court related sensitive documents.

Bitfinex had claimed to stop serving New York traders in 2015, but has since continued offering services to New York residents.

The first round of confrontation between the New York Attorney General’s Office and Bitfinex began on April 25 this year.

Attorney General Letitia James of the New York Department of Justice filed a complaint with the Manhattan Supreme Court, arguing that Bitfinex, Tether and their parent company iFinex Inc. concealed a deficit of US$850 million; privately misappropriated Tether reserves to fill the loss.

Letitia James asked Bitfinex to ban cryptocurrency trading services for New York customers.

The reason for Bitfinex's counterattack is that the US$850 million is not a shortfall, but is deposited in the account of Crypto Capital, which was confiscated by Polish, Portuguese, and US government authorities, or the funds were frozen in other ways.

On May 16, New York Supreme Court Justice Joel M. Cohen agreed to amend the April 25 business ban on Bitfinex.

According to the court decision, the revised ban period is 90 days. Bitfinex officials stated in the announcement that the original ban was too vague, broad and time-limited.

It is worth noting that in early May, Bitfinex issued LEO to raise US$1 billion, and its purpose was suspected to be used to fill the funding gap of US$850 million.

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The Attorney General is still "challenging" Trump

Leading the proof against Bitfinex is Letitia James, the current Attorney General of the New York Department of Justice.

Previously, Letitia James was a public defender with more than ten years of legal experience. He is a hardliner in financial supervision and corporate financial transparency.

July 23, Letitia James statement: President Trump has spent his career hiding behind litigation, but as New York’s Chief Law Enforcement Officer, I can assure him that no one is above the law, not even the President of the United States .

Regarding Letitia James' insistence on prosecuting Bitfinex, Zhao Dong said on Weibo: "I don't think Bitfinex and Tether have committed any crimes or committed any crimes. Things that don't kill you will only make you stronger."

An American lawyer commented privately to Zhao Dong: "(Letitia James) is trying to make herself famous."

Shah Hafizi told Deep Chain Finance: "(The New York Attorney General's Office) is experienced in financial regulation and law enforcement. They have real concerns. We should not ignore their ideas so thoughtlessly. I believe Bitfinex is taking this matter seriously. .”

Tether's side believes that regulators have no jurisdiction over the alleged conduct involved. Lawyers argue that Tether and Bitfinex are not registered in New York, and there is no evidence in the extensive documents filed by the New York Attorney General's Office that any investors have been subject to abuse. actual damage.

The lawyers pointed out that the relevant regulations of the current "Martin Act" do not apply to Tether's USDT, because neither Tether nor Bitfinex are registered in New York.

Created in 1921, the Martin Act is a New York State business law. The act prohibits financial fraud in New York State against persons inside or outside the country. The draconian aspect of the act is that the Attorney General can convict a financial institution for fraud without proving intent, and the person under investigation has no self-esteem. right to defense.

The Manhattan Supreme Court referred to the opinions of Tether's defense lawyers, and Bitfinex won the "first battle".

International tax lawyer and certified public accountant Selva Ozelli holds the opposite view. He believes that the Attorney General of the New York Department of Justice has jurisdiction over offshore affairs under New York's "Martin Act". The reason is that although Bitfinex is not registered in New York, But there are business operations in New York.

Zhao Dong said that the New York Attorney General's Office is not clear about the latest evidence of Bitfinex.

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The Coveted Stablecoin Throne

iFinex, a subsidiary of Bitfinex, had a gross profit of US$330 million and a net profit of US$320 million in 2017, and a gross profit of US$410 million and a net profit of US$400 million in 2018.

Since USDT was issued in November 2014, it is suspected that the relevant audit report has not been published for a long time. It was not until November last year that Tether, the issuer of USDT, completed its compliance registration with FinCEN.

In the past five years, USDT, which was originally issued to solve the problem of legal currency deposit access restrictions, currently has a total market value of about 27.8 billion yuan and is listed on 148 exchanges.

At present, the most common stablecoins are mainly issued based on the fiat asset-backed model, including PAX, TUSD, GUSD, USDC, etc.

Compared with USDT, these four stablecoins all follow the route of compliance and audit transparency. Their audit firms are all well-known and old-fashioned audit firms. PAX and GUSD are even known as stablecoins born with "golden keys" .

The issuer of PAX is Paxos, a well-known trust company from the United States. The financial audit work is performed by Withum, one of the top 15 accounting firms in the United States. In addition, Paxos has not only obtained the necessary MSB license, but also has the "gold medal in industry supervision" - trust charter.

GUSD claims to be the world's first regulated stablecoin, and its issuer is the well-known Gemini exchange, and the audit is handled by BPM, a 30-year-old California firm.

USDC is jointly issued by Coinbase and Circle’s exchanges, and its audit unit is Grant Thorntom. According to the OK Research research report, Coinbase and Circle are the two companies with the best compliance construction.

TUSD was issued in March 2018, with a current total market value of approximately 1.427 billion yuan and listed on 38 exchanges; GUSD was issued in September 2018 with a current total market value of 610 million yuan and listed on 19 exchanges; PAX and GUSD are also issued on In September 2018, the former has a total market value of about 755 million yuan and is listed on 36 exchanges, while USDC has a total market value of about 988 million yuan and is listed on 27 exchanges.

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(Price deviation of several representative stablecoins. Source: OK Research)

The more people use it, the higher people's confidence in the currency. If 10,000 people use currency A and 10 people use currency B, new users will definitely accept currency A more easily.

But if 10,000 people give up using currency A and 10 people give up using currency B, new users are more willing to choose to use currency B directly.

User confidence depends on the creditworthiness of the currency. It is hard to say how long USDT's dominance in the market will last.

As for the impact of the proof meeting on USDT, Zhao Dong said: "The market has already told you."