Tether to launch Sterling Pound backed stablecoin, commits to cooperation with British regulators
- By FXT
- June 27, 2022
- FXT Analysis
Tether has announced plans to launch a new stablecoin backed by the British pound, further expanding its range of tokens pegged to some of the world’s most widely traded currencies.
The new pound-backed GBPT is scheduled for release in July, and is designed to maintain a 1-to-1 parity relationship with the pound sterling.
It is the fifth stablecoin issued by Tether that is pegged to a national fiat currency, following the release of others backed by the US dollar (USDT), the euro (EURT), the offshore Chinese yuan (CNHT) and the Mexican peso (MXNT).
In announcing the move, Tether highlighted its efforts to work closely with UK regulators to ensure the success of the new stablecoin.
“We believe that the United Kingdom is the next frontier for blockchain innovation and the wider implementation of cryptocurrency for financial markets,” said Tether’s chief technology officer Paolo Ardoino.
“Tether is ready and willing to work with UK regulators to make this goal a reality and looks forward to the continued adoption of Tether stablecoins.”
The launch of the new pound-pegged stablecoin arrives during an especially tumultuous period for cryptoassets, and stablecoins in particular.
Cryptocurrencies have seen precipitous declines across the board since the start of 2022, on the back of breakneck inflation that has roiled advanced economies, and subsequent monetary tightening by jittery central banks.
A landmark event in the 2022 meltdown of the crypto-assets market has involved the algorithmic stablecoin TerraUSD, and its sibling reserve asset cryptocurrency, Luna.
The collapse of TerraUSD in May led to the wipe out of nearly $45 billion in market capitalisation within the space of just a week. Observers have blamed concerted effort by short sellers for the crash, accusing them of using Terra to trigger a decline in Bitcoin prices.
TerraClassicUSD to USD
While both Tether and Terra are stablecoins that are pegged to the fiat currencies of nation-state central banks, they nonetheless differ profoundly in design.
TerraUSD may have been pegged to the US dollar, but departed radically from other pegged currencies in that it was not backed by reserves for which it could be readily exchanged by holders.
Terra instead makes use of a complex process called the “burn and mint equilibrium,” which involved the algorithmic calibration of the relationship between TerraUSD and its sibling cryptocurrency, Luna.
This process was designed to ensure that the US dollar value of TerraUSD remained stable, with Luna bearing the brunt of volatility.
By comparison, the model for Tether stablecoins is far simpler, and could even be referred to as traditional. Tether maintains the peg of its stablecoins by means of currency reserves for which the the tokens be exchanged – a technique used throughout the modern era by central banks to peg the currencies they issue to either the price of gold or the greenback.
Things are not always as simple as they seem however, and Tether has recently been embroiled in legal difficulties over the adequacy of the reserves it maintains for its stablecoins.
In February 2021 Tether paid a fine of $18.5 million to resolve a legal dispute with the New York Attorney General’s Office over claims concerning its currency reserves.
The OAG found that iFinex – the operator of Bitfinex and Tether, had made false statements on the backing of the stablecoins, and that “Tether’s claims that is virtual currency was backed by U.S. dollars at all times was a lie.”