Tether is 'crypto Chernobyl' waiting to happen warns ex-financial regulator

People have argued that it's only a matter of time before Tether (USDT) will experience a 'crypto Chernobyl' – a move that could leave many penniless.

The cryptocurrency has been subject to back-and-forths over its credibility as they battle to gain investors' trust.

So, what exactly is Tether?

Tether is a blockchain-based cryptocurrency owned by the Hong Kong-based company iFinex Inc.

Launched in 2014, Tether uses what is known as a stablecoin, a digital token pegged to a national currency, to ensure that it maintains a stable valuation.

"The idea is that 1 Tether can always be traded for $1, regardless of market conditions," Steve Bumbera, chief operating officer of Many Worlds Token, explained to Forbes.

Tether tokens allow businesses (including ATMs, exchanges, wallets and financial services) to use fiat currencies on blockchains. The company have claimed that some of the largest businesses in the digital currency ecosystem have integrated Tether tokens.

Individuals can also use Tether-enabled platforms to transact with Tether tokens.

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Despite stablecoins being a popular choice among crypto users, there has been growing controversy surrounding liquidity issues.

Last month Boston Fed President Eric Rosengren called Tether a potential risk. Others have called the loss of confidence in Tether crypto's "black swan."

One former US financial regulator said: "Tether is a financial Chernobyl waiting to happen. It should never have been allowed to grow so big unchecked."

Tether slammed that criticism as "misguided and misinformed", adding that its coin was the "largest and most trusted stablecoin in the world".

"You’d be a fool not to short Tether," said the co-founder of Viceroy Research, Fraser Perring. "It’s time to wake up."

Perring told POLITICO he is convinced Tether is being dishonest about its finances, pledging on Twitter that he would donate $1 million to Tether's charity of choice if they open their books and prove him wrong.

Tether has refuted claims with a post about the "extraordinarily volatile" few months.

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