The settlement triggered concerns that the CFTC’s role in stablecoin regulation could be misunderstood by the public.
On Oct. 15, the Commodity Futures Trading Commission, or CFTC, handed sister crypto companies Tether and Bitfinex fines totaling $41 million and $1.5 million, respectively, citing violations of the Commodity Exchange Act, or CEA, and of a prior CFTC order.
The regulator has found that Tether, the firm behind an eponymous stablecoin, has only held sufficient fiat reserves to back the dollar-pegged asset for 27.6% of time during the 26-month period under review between 2016 and 2018. The agency also stated that Tether violated the law by holding part of the reserves in non-fiat financial instruments, as well as by comingling operational and reserve funds.
In a simultaneous action, the commodity futures watchdog settled charges with Bitfinex for facilitating “illegal, off-exchange retail commodity transactions in digital assets with U.S persons” on its platform, in addition to operating “as a futures commission merchant, or FCM, without registering as required.”
In a concurring statement, CFTC Commissioner Dawn Stump backed the action while also expressing concerns that the settlement could “provide users of stablecoins with a false sense of comfort” as they may falsely conclude that CFTC regulates stablecoins and oversees their issuers.
While the CFTC has applied a broad definition of a “commodity” to stablecoins in the present case, Stump distanced the Commission from regulating this asset class and having “daily insight into the businesses of those who issue” stablecoins.
Tether issued a rebuttal statement, insisting that it “maintained adequate reserves” at all times. The firm explained its decision to settle by its willingness to “resolve this matter in order to move forward and focus on the future.”