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Tether promises an audit in ‘months’ as Paxos claims USDT is not a real stablecoin

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There will be an official audit of the world’s most popular stablecoin Tether within months according to the project’s general counsel.

An audit for the world’s third-largest digital asset has been awaited for several years and increased regulatory pressure appears to have accelerated the process.

In a rare mainstream media interview on CNBC, Tether CTO Paolo Ardoino and general counsel Stu Hoegner were asked some pressing questions on the subject of USDT’s backing and transparency.

Hoegner responded to the question by saying:

“We are working towards getting financial audits, which no one else in the stablecoin sector has done yet.”

Hoegner added that the firm hopes to be the first to do so and that audits will be coming in “months, not years”. He stated that Tether is backed one-to-one with its reserves but admitted that those reserves were not all US dollars. According to Hoegner, Tether’s reserves are heavily dollar-weighted but also include cash equivalents, bonds, secured loans, crypto assets, and other investments.

The current market capitalization of USDT is 62 billion according to Tether’s transparency report. It has grown by 195% since the beginning of the year but has lagged behind rivals USDC and BUSD in terms of growth.

Related: Coin Metrics co-founder takes aim at WSJ’s Tether FUD

Circle released its own reserves disclosure report on July 21, revealing that 61% of USDC’s reserves were held in cash and cash equivalents with the rest in commercial paper accounts, treasuries, and bonds.

Paxos takes a swipe

In a related development, rival stablecoin company Paxos took a swipe at both Tether and Circle in a July 21 blog post claiming that they are “not comprehensively overseen by any financial regulators.”

“Neither USDC nor Tether is a regulated digital asset, for the simple reason that neither token has a regulator. In fact, neither USDC nor Tether tokens are ‘stablecoins’ in anything other than name.”

Paxos revealed that 96% of its own stablecoin reserves are cash or cash equivalents.

Tether revealed a breakdown of its USDT backing for the first time in May, following increased scrutiny from U.S. lawmakers. The firm has been submitting periodic reports regarding its reserves since reaching a settlement with the New York Attorney General’s Office in February.



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Regulation

El Salvadorians take to the streets to protest Bitcoin law

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Protesters calling themselves the Popular Resistance and Rebellion Block have come out against El Salvador’s government passing a law making Bitcoin legal tender.

A Tuesday tweet from local news outlet El Mundo shows El Salvadorians carrying banners saying “no to Bitcoin” in the streets of San Salvador demanding a repeal of the country’s Bitcoin law. Legislative assembly members Anabel Belloso and Dina Argueta addressed the protesters after first meeting the group separated by a barrier of razor wire.

In a letter made available at the protest, the Popular Resistance and Rebellion Block group claimed that President Nayib Bukele passed the law making the cryptocurrency legal tender in the country without proper consultations with the people. It also cited the volatility of Bitcoin (BTC), comparing investing in the cryptocurrency to playing the lottery: “betting on the lottery is a voluntary act, while Bitcoin is required by law.”

Related: Coercion and coexistence: How El Salvador’s Bitcoin Law may change global finance

However, the group’s main grievance around the Bitcoin legal framework seemed to be centered around a perceived disparity in the cryptocurrency’s usage by the government when compared with the average resident in El Salvador. Protesters said Bitcoin “only serves some large businessmen, especially those linked to the government, to launder ill-gotten money.”

“Entrepreneurs who put their capital in Bitcoin will not pay taxes on their earnings,” said the letter. “In addition, to apply Bitcoin the government will spend millions of dollars of the taxes paid by the people.”

They added:

“Bitcoin would facilitate public corruption and the operations of drug, arms and human traffickers, extortionists and tax evaders. It would also cause monetary chaos. It would hit people’s salaries, pensions and savings, ruin many MSMEs, affect low-income families and hit the middle class.”

Though passed by El Salvador’s government and signed into law by Bukele in June, the law recognizing Bitcoin as legal currency in the country will not go into effect until Sept. 7. The Popular Resistance and Rebellion Block’s protest was aimed at government officials to demand the law be repealed. In addition, the World Bank has also refused to help El Salvador transition to a Bitcoin-friendly framework, given its “environmental and transparency shortcomings.”

Related: What is really behind El Salvador’s ‘Bitcoin Law’? Experts answer

During a scheduled visit by the U.S. State Department earlier this month, Under Secretary of State for Political Affairs Victoria Nuland suggested El Salvador ensure Bitcoin is well regulated and transparent, but did not explicitly say anything against the country’s move to a more digital economy. Some proponents of the law including Bukele have suggested Bitcoin could help facilitate remittance payments from El Salvador citizens living abroad and lessen the country’s reliance on the U.S. dollar.