(Bloomberg) -- Questions about the influence of Tether continue to swirl in cryptocurrency markets, even as the companies behind it defend the so-called stablecoin’s soundness.

Tether, whose backers say is equivalent one-to-one to the dollar, is used in transactions to move between cryptocurrencies and fiat money. Traders also often use the token as a place to park funds at times of high volatility, and many consumers in China use it to enter the digital-asset markets. It has a market capitalization of about $34 billion, according to CoinGecko -- but in a sign of how much it’s used in the system, the 24-hour trading volume on Friday was about $107 billion.

Tether “is engaged in a classic liquidity transformation along the lines of traditional commercial banks, but is not subject to the same strict supervisory and disclosure regime, and certainly does not have anything like deposit insurance,” JPMorgan Chase & Co. strategists including Josh Younger and Joyce Chang, wrote in a report released late Thursday. Tether Ltd. claims to have reserve assets of cash and equivalents equal to its outstanding liabilities, but has “famously not produced an independent audit and has claimed in court filings that they need not maintain full backing,” the strategists said.

“Were any issues to arise that could affect the willingness or ability of both domestic and foreign investors to use Tether, the most likely result would be a severe liquidity shock to the broader cryptocurrency market which could be amplified by its disproportionate impact on high-frequency-trading-style market makers which dominate the flow,” the JPMorgan strategists wrote.

Other industry observers are less concerned, citing the wide use of Tether by large exchanges such as Binance.

“The facts of mass adoption tilt favorably toward Tether’s legitimacy,” said Bloomberg Intelligence strategist Mike McGlone. “It was about April 2019 that Tether came under investigation by the New York Attorney General. Since then, they have been under their microscope, yet the assets under management has jumped to about $30 billion from around $5 billion. It seems the market doesn’t care.”

New York’s attorney general has alleged that the officials who control the crypto exchange Bitfinex and Tether failed to disclose that it entrusted more than $1 billion of commingled client and corporate funds to a Panamanian firm, Crypto Capital Corp. Bitfinex and Tether have said they’re seeking to recover funds lost when Crypto Capital was shut down.

Unlike other currencies such as Bitcoin that are “mined,” Tether officials say they create new coins based on customer orders. That has led to speculation that Tether was being used to lift the price of Bitcoin, an allegation Bitfinex officials dispute.

Even with the wide market acceptance of Tether and Bitcoin at a record high of more than $52,000, that hasn’t eased the lingering concerns.

“A critical lesson of last March is no asset class, including even U.S. Treasuries, is ‘safer’ than the ability to exchange it for fiat cash at a reasonable cost,” the JPMorgan strategists said.

©2021 Bloomberg L.P.