The study Bitmex: Tether is not a pyramid, but can be shut down by regulators

Research unit of the exchange Bitmex has released a detailed and extensive study. This time it concerns the company and its Tether token USDT. The study Bitmex understands whether U.S. regulators, the reasons for terminating the activities of the company and investigates allegations of USDT are not provided with reserves in dollars.

In the introduction the researchers raise some of the most pressing problems associated with the company and its token USDT:

«There is some skepticism about the Tether. In particular, charges that the system does not have sufficient reserves in traditional currency. We believe that the skepticism is misplaced. We found evidence in the published financial data that the presence of the Tether may in the banking system of Puerto Rico. Most likely, the Tether will be or are already facing problems related to regulation, and we believe that it should be a core long-term problem for the owners of the tokens».

Bitmex: Tether do not need the blockchain

Investigating a November burglary, which was stolen USDT $ 31 million, representatives of Bitmex note:

«A case of burglary has demonstrated that Tether full control of the registry, so how can they cancel any transactions… It raises the question about why Tether at all engaged in the placement of the base data in the blockchains of Bitcoin and Ethereum — it would be much cheaper to Tether to create their own open database without having to pay the miners».

Bitmex further Research confirms the insufficient transparency of the Tether, but notes: «the Lack of transparency does not mean fraud.» Bitmex also notes that Tether, will soon face problems in relation to money laundering and accusations of aiding and abetting criminal activity because of the high degree of anonymity provided by the company:

«Tether characteristics make it potentially attractive for criminals, as in the case of bitcoin… Regulators are unlikely to be particularly happy about this, and banks will likely react to Tether with skepticism. While Tether is necessary to resort to services of banks to keep reserves that are required to support token. Many banks cautiously treat the Tether as the company’s activity violates the policy of financial institutions against money laundering».

Puerto Rico: a Paradise for banks?

In the study much attention is paid to rumors that the Tether is planning or has already moved its banking operations in Puerto Rico, where regulators take a more liberal views. According to researchers it is highly likely that all the reserves of traditional currency support USDT, are stored in the banking system of Puerto Rico. Though it is not the ideal scenario, however, it confirms that the Tether is not a pyramid scheme, which is unsecured.

At the end of the report the authors mention several unlicensed companies providing services of money transfers in the past, including Liberty Reserve and E-Gold, before you can conclude the following:

«In our view, the Tether has two options: 1. Modify their work to include the procedure KYC/AML, allowing the operator to easily block the transaction or freeze the funds. 2. Continue in the same spirit and risk termination of activities under pressure from the authorities».

In conclusion, the authors write: «If the Tether is closed, there is a risk of loss of user access to their funds, perhaps temporarily. We therefore recommend to store the Tether for a long period of time.»

Recently, researchers Bitmex has published a report on Ripple, which claim that the system can be even more centralized than previously thought.

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