- BlackRock’s Bitcoin ETF application, filed in June, includes warnings about how Tether and the stablecoin market could affect its Bitcoin ETF.
- The filing suggests that a disorderly de-pegging or run on Tether or USDC could lead to significant market volatility in the digital asset sector.
Tether’s Influence on Bitcoin ETF
BlackRock, the world’s largest asset manager, recently spotlighted Tether (USDT) in its Bitcoin exchange-traded fund (ETF) filing, raising concerns about the stablecoin’s potential to affect Bitcoin’s price and market stability. The June filing, which has recently caught the attention of the crypto community, points to the broader implications of stablecoins on the digital asset market.
Stablecoins and Market Volatility
The BlackRock filing acknowledges that while the trust does not directly invest in stablecoins, the bitcoin market and other digital asset markets could be significantly affected by them. The concern centers around the possibility of a disorderly de-pegging or a run on major stablecoins like Tether (USDT) or USDC, which could trigger dramatic market volatility. The filing underscores the reliance of a large portion of the digital asset market on stablecoins, with Tether’s USDT being the third-largest cryptocurrency by market capitalization.
Neato.
BlackRock is spreading Tether “FUD”.
Mentions unbanked stablecoins can create artificial demand.
Discloses Tether fraud has been sanctioned for unbacked tethers.
Discloses Tether laundering money.
I guess the FUD is super effective. pic.twitter.com/av6JMp8IGX
— Bitfinex'ed 🔥🐧 Κασσάνδρα 🏺 (@Bitfinexed) November 13, 2023
Controversy Surrounding Tether
Tether, the issuer of USDT, has been embroiled in controversy due to its slow pace in providing proof that U.S. dollars fully back its stablecoin and lack of independent audits. The scrutiny increased after Tether settled with the New York Attorney General in 2021, agreeing to cease operations in New York. This action followed an investigation that found Tether made false statements about the backing of its stablecoin.
Impact of Stablecoin Turmoil
The risks associated with stablecoins are not trivial, as evidenced by the crypto market’s reaction to the collapse of the Terra UST algorithmic stablecoin in the previous year. Bitcoin and the broader digital asset market experienced significant downturns following the Terra UST incident, highlighting the interconnectedness of the crypto ecosystem.
BlackRock’s Prudent Approach
While the mention of Tether and stablecoins in BlackRock’s filing has sparked discussions, it reflects a prudent approach to disclosing potential risks in the ETF application. This level of caution is necessary given the unpredictable nature of the cryptocurrency market and the potential for unforeseen events to impact market dynamics. The inclusion of such risks in the filing is a standard practice among ETF issuers, emphasizing the need for thorough risk assessment in the ever-evolving digital asset space.
