New York court orders Tether to provide documents on USDT reserve

A New York court ordered Tether to provide financial records showing the backing for USDT.

According to the order, Tether is to produce all records of transfer of trade of any cryptocurrency or stablecoins by the company and other documents such as “general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements.”

Tether must also provide information about its accounts at Bittrex, Bitfinex, and Poloniex.

Tether argued against the order

The stablecoin issuer argued against the order, saying it was overboard and burdensome, but Judge Katherine Polk Failla disagreed. According to her, the plaintiffs clarified why the information was necessary.

Judge Failla wrote:

“The documents sought in the transactions RFPs appear to go to one of the Plaintiffs’ core allegations: that the … Defendants engaged in cyptocommodities transactions using unbacked USDT, and that those transactions “were strategically timed to inflate the market”

The order is linked to a lawsuit that accuses Tether and Bitfinex of manipulating the crypto markets to the detriment of traders.

The plaintiffs claim that Tether lied about the USDT backing and also alleged that the stablecoin was used to buy Bitcoin (BTC), inflating the crypto market and causing the eventual crash.

According to the plaintiffs, Tether caused over $1 trillion in damages to the crypto market.

Tether did not respond to a request for comment as of press time.

Algorithmic stablecoin faces 2-year ban

Bloomberg reported that US legislators are working on a comprehensive stablecoin regulation bill that could have a far-reaching effect on the industry’s operations.

According to the report, the legislators’ bill would ban algorithmic stablecoins similar to TerraUSD for the next two years. The report stated that it would be illegal to create or issue new “endogenously collateralized stablecoins.”

The bill would also allow banks and non-banks to issue stablecoins based on established procedures. However, businesses would be prevented from mixing their assets with customer funds -stablecoins, private keys, and cash- in case of bankruptcy.

Meanwhile, the bill would direct the Federal Reserves to study the effect of a digital dollar project on the economy and the financial privacy of citizens.

Terra’s implosion has led to increased calls for regulation of the nascent industry.