Bad news for the Tether (USDT) stablecoin, something we at The Cryptonomist had already alluded to in terms of a potential downturn.
It appears that cryptocurrency exchange Crypto.com will remove the ability to conduct transactions associated with the stablecoin in Canada, resulting in its delisting.
In the region in question, Tether (USDT) represents the largest stablecoin by market capitalization, it will certainly be a blow to Canadian users of Crypto.com.
Crypto.com’s relationship with Tether (USDT) ends, for the time being only in Canada
A Crypto.com representative stated thus:
“Crypto.com has removed USDT for users in Canada in accordance with Ontario Securities Commission (OSC) instructions as part of our commitment to pre-register for a limited reseller license.”
Despite various rumors that the email was fake, after several verifications, it was verified that the email containing the news was indeed from the cryptocurrency exchange.
So it is official, as of 31 January at 01:00 for users residing in Canada it will be impossible to transact using USDT.
The delisting will affect both withdrawals and deposits, and all forms of trading related to stablecoin will be terminated. This leaves three weeks for Crypto.com users to convert their USDT to another stablecoin, or move it to other exchange platforms or wallets.
An excerpt from the email received by Canadian Crypto.com users:
“This email is to inform you that Tether will no longer be supported by the Crypto.com App. On January 31, 2023, at 01:00 EST, USDT will be delisted and transactions in USDT will be suspended. Please urgently verify your USDT balance and apply any necessary action (withdrawal or conversion) before the implementation date.”
All remaining USDT in the platform will be “automatically” converted to Circle’s USD Coin, a stablecoin also pegged to the dollar price. There is also a risk that after the deadline set for 31 January, it will no longer be possible to withdraw the remaining Tether (USDT), or they could be recovered through the payment of a very high fee.
The reasons for this move are still unknown; there is no specific reason explained in the email from the Crypto.com exchange platform.
The only assumption we can make is that Crypto.com is also complying with the crypto policies adopted in Canada. In fact, the country has been trying to regulate cryptocurrencies for quite some time now.
The first step taken toward crypto regulation in Canada concerns stablecoins. In fact, the CSA (Canadian Security Administrators) is looking at stablecoins because they fall under securities, or they could even be derivatives.
The situation seems to be at a standstill since the last email, we are waiting for more information on whether the matter is official. In the coming days, most likely some Crypto.com representative will be prompted to comment regarding the separation from Tether (USDT).
The Canadian Securities Administrators and their member securities commissions started issuing guidance in 2021 regarding requirements for regulated exchanges on the matter of stablecoin support, at that time particularly related to USDt. The topic just resurfaced as a result of Crypto.com needing to comply with Canadian regulatory requirements.
Our ethos lies in providing a path to financial freedom for emerging markets with an emphasis on education. Canada is not a core market for Tether. While this does not mean that we will abandon our interest in ensuring that Tether products can be used beyond any borders we abide by regulatory guidelines. With that being said, we can see how Canada is moving more aggressively on crypto regulations than most other countries. We believe that a more fair, open and forward looking approach to financial access should be encouraged. Regulations that encourage financial freedom can only bring about positive change. We will continue to prioritize our objectives as we strive to instill new levels of trust into crypto, blockchain, and its potential to chain the global financial infrastructure as we know it.
USD₮ is the most trusted, innovative, and liquid stablecoin in the digital token space. Tether Limited, which is registered as an MSB with FinCEN, has a compliance program that makes reports to FinCEN and is subject to regulatory examination. Tether also reports to the BVI’s Financial Investigation Agency pursuant to applicable law.
Even Coinbase attacks USDT
Not only in Canada, also in the United States, specifically by the American platform Coinbase, Tether (USDT) is frowned upon.
In fact, the Coinbase platform recently urged all its users to convert their Tether (USDT) stablecoins to USD Coin, which was created by Coinbase and issued by Circle, which is the same stablecoin recommended by Crypto.com as well.
“Now more than ever, stability and confidence are of utmost importance to clients. Stablecoins backed by fiat (cryptocurrencies pegged to reserve assets such as the U.S. dollar) offer clients stability and confidence during periods of volatility.
However, events in recent weeks have tested some stablecoins and we have seen a flight to safety. We believe USD Coin (USDC) is a reliable and reputable stablecoin, so we are making the transition easier: starting today we are waiving fees for global retail clients to convert USDT to USDC.”
Tether is now at a delicate juncture, after the collapse of FTX it is considered less reliable and less transparent than other stablecoins.
The alternative recommended by Coinbase and Crypto.com platforms appears to users to be safer and more reliable. Even Coinbase took the liberty of eliminating the conversion from Tether (USDT) to USD Coin to encourage its customers to transact.
There is a need for a real revolution in Tether’s image, after recent events, a small crisis could trigger a hurricane for the Tether (USDT) stablecoin.
“Tether’s reserves are extremely liquid with the majority of its investments, making up 82 percent of total assets, held in Cash & Cash equivalent and other short-term deposits. The quarterly opinion also showed a massive reduction in commercial securities with exposure representing only 0.07 percent of reserves as of the date of the report.
Tether reduced its exposure to commercial paper by more than $24 billion without loss during 2022, fulfilling both its promise and commitment to the community to do so.”
In conclusion, we do not know how the next events will unfold, but there will certainly be explanations regarding the relationship between Crypto.com and Tether (USDT), with the hope that it will not lead to a bigger crisis for the stablecoin.