Tether breaks the $1 peg as pressure mounts on the world's largest stablecoin

Tether came under increasing pressure on Thursday, pushing the price of one of the most important assets in global crypto markets well below its $1 mark.

The $80 billion stablecoin, designed to track the value of $1, fell to 95.11 cents early in European trading Thursday, according to a CryptoCompare index tracking trading on the world's leading digital asset exchanges.

Stablecoins claim to offer crypto traders a safe place to park their money between bets on volatile cryptocurrencies. Tether, by far the largest stablecoin in the world, plays a crucial role in facilitating trading in the crypto market and also provides a connection to the traditional financial system.

The fall in Tether's price to more than 3 percent below its $1 peg ricochet across the digital asset market. Bitcoin, the most actively traded cryptocurrency, fell nearly 7 percent to $26,250, its lowest level since December 2020.

Tether's decline comes after TerraUSD, a much smaller stablecoin, completely broke away from its peg to the dollar. Tether, unlike TerraUSD, claims to be backed by a basket of dollar-based assets. However, his supporters have declined to provide detailed information about his holdings.

The group was fined $41 million by the US Commodity Futures Trading Commission last year over allegations that it made misleading statements from at least June 2016 to February 2019 about having sufficient dollar reserves to cover each of its circulating stablecoins.

Regulators have cited stablecoins, which are largely unregulated in most markets, as a risk to financial stability. The Federal Reserve said earlier this week that just three stablecoins, Tether, USDCoin and Binance USD, account for 80 percent of the $180 billion market.