U.S. regulators are scrutinizing one of the world’s largest cryptocurrency exchanges as questions mount over a digital token linked to its backers.
The U.S. Commodity Futures Trading Commission sent subpoenas on Dec. 6 to virtual-currency venue Bitfinex and Tether, a company that issues a widely traded coin and claims it’s pegged to the dollar, according to a person familiar with the matter, who asked not to be identified discussing private information. The firms share the same chief executive officer.
Tether’s coins have become a popular substitute for dollars on cryptocurrency exchanges worldwide, with about $2.3 billion of the tokens outstanding as of Tuesday. While Tether has said all of its coins are backed by U.S. dollars held in reserve, the company has yet to provide conclusive evidence of its holdings to the public or have its accounts audited. Skeptics have questioned whether the money is really there.
“We routinely receive legal process from law enforcement agents and regulators conducting investigations,” Bitfinex and Tether said Tuesday in an emailed statement. “It is our policy not to comment on any such requests.”
Erica Richardson, a CFTC spokeswoman, declined to comment.
Bitcoin, the biggest cryptocurrency by market value, tumbled 10 percent on Tuesday. It fell another 3.2 percent to $9,766.41 as of 9:19 a.m. in Hong Kong, according to composite pricing on Bloomberg. The virtual currency hasn’t closed below $10,000 since November.