JPMorgan cautions about the potential risks to the crypto markets due to Tether’s rapid growth, issues a specialized report.
Tether (USDT), the largest stablecoin, has achieved an astonishing annual run rate of $11.4 billion in just 90 days, surpassing traditional financial giants and reaching a circulation of nearly $100 billion. This remarkable success has even outperformed the profits of banking giant Goldman Sachs in the last quarter, according to Matt Hogan, Bitwise CIO. However, JPMorgan has raised concerns about Tether’s dominance, citing regulatory compliance and transparency issues.
JPMorgan analysts, led by Nikolaos Panigirtzoglou, argue that Tether’s growing dominance is detrimental to stablecoins and the crypto industry as a whole. They view Tether as a significant regulatory risk due to the various regulatory issues it faces in multiple jurisdictions. JPMorgan believes that Tether’s openness about these issues makes it an unfavorable choice for long-term investors.
In defense of Tether, CEO Paolo Ardoino suggests that Tether’s market dominance may have a negative impact on competitors, including banks aspiring for similar success. However, he highlights the positive impact Tether has on markets that rely heavily on its services, as the company diverts up to 15% of its operating profit to Bitcoin purchases.
Supporting Tether’s approach, Pompliano emphasizes the company’s unique strategy of holding reserves in diverse investments for availability and protection. He points out that Tether’s excess equity of $5.4 billion surpasses any remaining secured loans. Notably, Tether is considered one of the most lucrative businesses globally, with a profit per employee exceeding $100 million.
According to the report, other stablecoins that comply with current regulations could thrive in the market. The bank specifically mentions USD Coin (USDC), which has applied for a public share sale in the U.S., as a stablecoin that could benefit from Tether’s regulatory issues by actively preparing for upcoming stablecoin regulations and expanding across jurisdictions.
Despite some negative reviews, Tether’s market value and market share have experienced significant growth. It is now widely used by centralized crypto exchanges and decentralized finance (DeFi) platforms. JPMorgan’s report reveals that Tether generated a record-breaking profit of $2.85 billion in the last quarter, showcasing its resilience even when other cryptocurrencies like USD Coin and Binance’s BUSD are facing challenges.
As Tether approaches a $100 billion market cap, its role in the crypto space raises concerns about regulatory oversight and potential impacts on other stablecoins.