Facebook Urged to ‘Step Back’ by Senate while Tether Fined $42M by CFTC – Regulations Weekly

Facebook is under fire for its role in the Cambridge Analytica scandal, which has left the company with a laundry list of issues to address. Meanwhile, Tether was fined $42 million by the CFTC for offering unregistered securities.

The what is tether article discusses the recent $42M fine that was issued by the CFTC to Tether. Additionally, Facebook has been urged to ‘step back’ and stop its Libra project by the Senate.


Concerns about Facebook in the Senate

Facebook has faced considerable opposition to its ambitions to release a digital asset and associated wallet from day one. Several U.S. Senators have expressed their dissatisfaction with Facebook’s recent introduction of its Novi pilot program, asking the company to stop its activities.

The Senators did not mince words in their letter, expressing bluntly about their faith in Facebook, based on the company’s past record. They discuss not just the possible financial instability that a digital asset like Facebook might bring, but also Facebook’s propensity for prioritizing profit above the well-being of the nation’s young. The following is an extract from the letter that summarizes the Senators’ position.

“Unfortunately, Facebook’s move to develop a digital currency and payments network is just another example of the corporation “moving fast and breaking things,” as the Wall Street Journal put it (and in too many cases, misleading Congress in order to do so). Facebook has repeatedly made deliberate economic choices to continue with activities that have damaged its users and society as a whole. Facebook cannot be trusted to run a payment system or digital currency since its current risk management and consumer protection capabilities have proved to be woefully inadequate.

We strongly encourage you to end the Novi pilot program immediately and pledge to not bringing Diem to market.”

Crackdown on Lending Services

For months, it has been apparent that authorities in the United States were cracking down on loan services, with firms like BlockFi, Nexo, and Celsius all under intense attention. New York Attorney General Letitia James recently announced that several lending platforms have been ordered to not only stop operations in the state within 10 days, but that several others are also being examined further.

“Cryptocurrency platforms, like everyone else, must obey the law, which is why we’ve ordered two crypto businesses to shut down and three more to answer inquiries right now… My office is in charge of ensuring that naïve investors are not taken advantage of by industry participants. We’ve previously taken action against a number of cryptocurrency platforms and currencies that have committed fraud or operated unlawfully in New York. Today’s measures expand on that effort and send a message to any business that believes it is above the law that we will not hesitate to take whatever steps are required.” — James, Attorney General

Celsius has taken the effort to resolve this problem, assuring its customers that it is not going away. “We have NOT received a stop and desist from New York state,” the firm claims, but rather a “request for information.”

Tether has been fined.

The actual backing of USDT is a contentious topic that predates the aforementioned scrutiny being put on lending sites. Simply stated, many people have questioned and continue to question Tether’s assertions that USDT has the support it claims to have. This issue is one of the reasons why competitors like USDC have been able to take such a big chunk of the stablecoin market in recent months.

Tether’s arguments were not enough to persuade the Commodity Futures Trading Commission (CFTC). Tether was found to have made “…untrue or misleading representations and omissions of material information in connection with the U.S. dollar tether token (USDT) stablecoin,” according to the regulator. 

The CFTC imposed and resolved charges against Tether as a result of this decision, with the firm paying a $41 million fine.

Because Tether is such a significant player in the digital asset space, these ongoing problems have piqued the attention of not just regulators but also forensic financial research companies. “…prize of up to $1,000,000 for information leading to previously revealed facts regarding cryptocurrency “stablecoin” Tether’s backing,” according to Hindenburg Research.

In essence, Hindenburg Research does not trust Tether’s assertions, claiming that it is committed to protecting investors by uncovering any hidden fraud. Tether, on the other side, has called this incentive a “opportunistic” and “pathetic” effort to profit.