Blockchain.com CEO says there’s never been “such a high chance” of US default, while Tether CTO considers it unlikely

Blockchain.com CEO says there’s never been “such a high chance” of US default, while Tether CTO considers it unlikely

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Executives from Tether and Blockchain.com both commented on the US government’s potential upcoming debt default on May 25.

Tether is not in danger, says CTO

Tether CTO Paolo Ardoino said the US is unlikely to default on its debt in the coming weeks. He said on The Block’s Scoop podcast:

“… do not think so [a U.S. default] will happen — I mean, it would be catastrophic for the American economy. I think everyone is sitting closely to monitor what is happening and what will happen.”

He also suggested that Tether is not at risk. Although much of Tether’s reserves consist of U.S. Treasury bonds, Ardoino said Tether has begun using instruments that provide the company with deep liquidity and have surplus reserves.

Ardoino said these instruments would protect its USDT stablecoin against a de-peg in the event of a “black swan” event – presumably including a default.

Recent reports revealed that Tether has $53 billion in US Treasuries. This constitutes 64% of Tether’s reserves; it also means that Tether has roughly the same amount of Treasuries as Thailand, which is the 25th largest country that holds US Treasuries.

Incidentally, the CEO of Tether’s main competitor, Circle, said this month that his firm is no longer holding long-term US Treasuries in anticipation of a possible default.

Blockchain.com CEO comments on US standard

Although Ardoino is confident that the crypto industry can survive a default, others have more limited optimism about the situation.

Blockchain.com CEO Peter Smith said during the 2023 Qatar Economic Forum:

“I believe on a short horizon… a US default or a US recession is probably bad for crypto… [But] I believe on a long horizon, they are probably good for crypto.”

Smith explained that a default could benefit crypto in the long term, similar to how recent bank failures caused initial losses but later led to a stronger market.

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He also argued that a U.S. default is somewhat likely, as he believes, based on his view of U.S. politics, that “there’s probably never been this much of a chance” that officials will not raise the debt ceiling. “It’s incredibly entrenched now and very difficult to pull off,” Smith added.

President Joe Biden and congressman Kevin McCarthy have not been able to reach an agreement on spending and debt ceilings as of May 25, according to Reuters. Finance Minister Janet Yellen has said that a default could occur by June 1 if the leaders do not reach an agreement.

Disclaimer: Our authors’ opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Do your own due diligence before doing anything related to the content of this article. Finally, CryptoSlate takes no responsibility if you lose money trading cryptocurrencies.

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