Deutsche Bank Research has stirred controversy within the financial realm by scrutinizing stablecoins, particularly focusing on Tether’s USDT. The report, examining 334 historical currency pegs dating back to 1800, revealed that only 14% have maintained stability, casting doubt on the longevity of stablecoins striving to mirror fiat currencies like the US dollar.
Tether, known for its pivotal role in providing stability amidst cryptocurrency market volatility, has faced criticism regarding the transparency and stability of its operations. Previous regulatory issues, including a $41 million fine from the Commodity Futures Trading Commission and an $18.5 million settlement with the New York Attorney General, have raised concerns about Tether’s reserve holdings and overall credibility.
Deutsche Bank analysts emphasize that historically successful pegged currencies were characterized by strong reserves, credibility, and strict regulation—qualities they argue many stablecoins lack. The collapse of Terraform Labs’ TerraUSD and Luna, wiping out $40 billion from the crypto market, serves as a stark example of potential instability.
Moreover, Tether’s dominant position in a market marked by speculation and opacity, with over 69% dominance in the stablecoin market according to DefiLlama, poses broader risks to the cryptocurrency ecosystem.
Despite these challenges, Tether’s CEO, Paolo Ardoino, remains optimistic, asserting Tether’s collaboration with global regulators and commitment to technology education.
The report comes amidst regulatory discussions in the US and the European Union, with potential legislative changes that could significantly impact compliance and operational standards for stablecoin issuers like Tether.
In response, Tether has strongly criticized Deutsche Bank’s report, defending its transparency and reserve-backing practices while questioning the credibility of the bank due to its own history of fines and penalties.
