On October 15, the Commodity Futures Trading Commission (CFTC) fined cryptographic subsidiaries Tether and Bitfinex $ 41 million and $ 1.5 million, respectively, for violating the Commodity Exchange Act (CEA) and a previous CFTC order.
The regulator found that Tether, the company behind the same stablecoin, only had enough legal reserves to support the dollar-pegged asset 27.6% of the time over the 26-month period from 2016 to 2018. The agency also reported that Tether broke the law by storing some of its reserves in non-cash financial instruments, and by mixing operating and reserve funds.
Simultaneously, the Commodity Futures Oversight settled a commission with Bitfinex for facilitating “illegal OTC digital asset trading with US individuals” on the platform and acting “as a commission futures or FCM trader without registering if necessary. ”
In a concurrent statement, CFTC Commissioner Don Stump endorsed the move, expressing concern that the settlement could “provide false comfort to stablecoin users” as they may erroneously conclude that the CFTC regulates and controls stablecoin issuers.
While the CFTC has used a broad definition of “commodity” for stablecoins in their current state, Stump has distanced the commission from regulating this asset class and “analyzes the business of those who issue” stablecoins on a daily basis.
Tether issued a statement denying this, insisting that it always has “sufficient reserves.” The company attributed the settlement’s decision to its willingness to “address this issue in order to move forward and focus on the future.”