CFTC fines Tether and Bitfinex $42.5 million

The Commodity Futures Trading Commission recently issued fines of $41 million and $1.5 million to sister crypto companies Tether and Bitfinex.

CFTC fines Tether and Bitfinex $42.5 million

The Commodity Futures Trading Commission, or CFTC, recently issued fines of $41 million and $1.5 million to sister crypto companies Tether and Bitfinex, the Commodity Exchange Act (CEA) and a previous CFTC order have been cited.

In the 26-month review period under review between 2016 and 2018, the regulator found that Tether, the company behind a stablecoin by the same name, only met the requirements to back the dollar-pegged asset 27.6% of the time.

Tether violated the rules by holding reserve funds in non-fiat instruments and combining operational funds with reserve funds, according to the CFTC.

A further penalty was paid by Bitfinex to the commodity futures regulator for servicing US residents with "illegal, off-exchange retail commodity transactions in digital assets" on its platform, along with operating without a compulsory license as a futures commission merchant."

CFTC Commissioner Dawn Stump endorsed the action while expressing concern that the settlement could "produce a false sense of security" among stablecoin users assuming that the CFTC regulates stablecoins and oversees their issuers.

Stablecoins are a commodity according to CFTC definition, but Stump says his commission does not have the authority to regulate this asset class, which one can derive insight into "daily" as well as "weekly" basis.

Adding to its rebuttal, Tether claimed that it always had adequate reserves on hand. In its decision to settle, the firm explained that it wanted to "move forward and focus on the future."

New York's attorney general investigated Tether in February over claims about its backing. Tether was not permitted to do business in New York due to the terms of that settlement.

The Tether digital currency is a stablecoin, which is supposed to be backed by a fiat currency. Because they are backed, they're considered a more stable alternative to other digital currencies (hence their name).