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Tether, Facebook Coin Spur Worry at Yellen’s Closed-Door Meeting

  • Regulators held high-level talk on risks posed by stablecoins
  • Tether’s commercial paper holdings are being scrutinized
Janet Yellen
Janet Yellen

Photographer: Shawn Thew/EPA/Bloomberg

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Tether and the Facebook Inc.-backed Diem token were a main focus of a recent meeting U.S. regulators held on the financial risks posed by stablecoins, a fast-growing corner of the cryptocurrency industry, said people familiar with the matter.

The President’s Working Group on Financial Markets, a team of watchdogs led by Treasury Secretary Janet Yellen, was particularly concerned about Tether’s claims that it holds massive amounts of commercial paper -- debt that companies issue to meet their short-term funding needs, the people said. Participants likened the situation to an unregulated money-market mutual fund that could be susceptible to a chaotic investor exodus, said the people who asked not to be named because the meeting was private.