Tether's Actions During Celsius Bankruptcy Under Scrutiny

In the wake of Celsius Network's bankruptcy filing, a lawsuit has emerged alleging that Tether, a major player in the cryptocurrency market, acted improperly by liquidating significant amounts of Bitcoin collateralized by Celsius. The complaint claims that Tether's decision to sell off this collateral was a breach of their agreement, allowing the company to recover its funds while other creditors faced losses. This move was crucial, as it prevented Tether's USDT token from being under-backed, which could have jeopardized its price stability. The lawsuit highlights that had Tether not liquidated the $800 million in collateral before Celsius's bankruptcy, it would have faced a potential shortfall in its USDT reserves. Legal expert Rosenberg noted that if the collateral had been held during the bankruptcy proceedings, Tether would have needed court approval to act, which might not have been granted. This situation could have led to a significant gap in Tether's reserves, raising concerns about the stability of USDT. In response to the crisis, Tether has reportedly increased its reserve buffer and reduced the proportion of secured loans in its reserves. However, experts point out that Tether operates without strict regulatory frameworks, raising questions about the governance of its operations. The recent implementation of the EU's Markets in Crypto Assets (MiCA) act aims to address some of these regulatory gaps, but the industry still grapples with uncertainty. As the stablecoin market evolves, the need for clear regulations becomes increasingly urgent. Industry analysts emphasize that without proper guidance, companies like Tether may continue to navigate a complex landscape fraught with risks.