A former chairman of the Commodity Futures Trading Commission is calling for more regulation of stablecoins or cryptocurrencies created to be linked to other assets such as fiat money.
Timothy Massad, who headed the commission for much of the Obama administration’s second term, told CNBC’s Jim Cramer that investors would benefit from more transparency in the wake of Tether Limited’s settlement with New York’s law firm in February.
Tether Limited is the company that issues tether, the most valuable stablecoin and the third most valuable cryptocurrency behind bitcoin and ethereum.
“We need a better framework for regulating tether and other stack coins,”
Tether and a related company, Bitfinex, agreed on a $ 18.5 million settlement with prosecutors to close an investigation into allegations that the companies owned by Ifinex moved money to cover a $ 850 million loss.
New York’s attorney general argued that the company incorrectly presented the status of its reserves sometime in 2018 and 2019. While the companies admitted not having made any mistakes, Tether was ordered to provide quarterly information on its reserves. It produced its first report in March.
The March report revealed some opaque uses of the money invested in the coins. According to the report, Tether had 13% of its assets in secured loans and 15% in commercial paper or unsecured short-term debt, Massad noted.
“We have no idea what kind of loan it is or who they are for” and “we do not know what kind of paper they are buying,” he said. “It’s all a concern, so I think we need more disclosure here.”