BlackRock’s Bitcoin ETF Filing Highlights Tether’s Influence and Stablecoin Volatility

BlackRock, the world’s largest asset manager, has drawn attention to Tether (USDT) in its Bitcoin exchange-traded fund (ETF) filing, expressing concerns about the stablecoin’s potential influence on Bitcoin’s price and overall market stability. The filing, submitted in June and now gaining traction in the crypto community, underscores the broader implications of stablecoins within the digital asset market.

The filing by BlackRock acknowledges that while the trust does not directly invest in stablecoins, the Bitcoin market and other digital asset markets could be significantly impacted by them. The central concern revolves around the scenario of a disorderly de-pegging or a sudden run on major stablecoins like Tether (USDT) or USDC, which could trigger dramatic market volatility. The document emphasizes the reliance of a substantial portion of the digital asset market on stablecoins, with Tether’s USDT ranking as 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 response in providing evidence that U.S. dollars fully back its stablecoin, coupled with a lack of independent audits. Scrutiny intensified following Tether’s settlement with the New York Attorney General in 2021, in which it agreed to cease operations in New York. This legal action followed an investigation that uncovered false statements regarding the backing of its stablecoin.

The risks associated with stablecoins are not to be underestimated, 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, underscoring the interconnectivity of the crypto ecosystem.

While the inclusion of Tether and stablecoin-related concerns in BlackRock’s ETF filing has sparked discussions, it demonstrates a cautious approach to disclosing potential risks in the application. This level of caution is essential due to the unpredictable nature of the cryptocurrency market and the potential for unforeseen events to disrupt market dynamics. The practice of including such risks in ETF filings is standard among issuers, emphasizing the importance of thorough risk assessment in the ever-evolving digital asset space.