One of the positive consequences of the crypto markets bloodbath is the increased effort many crypto companies are putting into securing their offer and their clients’ trust.
This endeavour is all the more important if the companies in question already have some stains on their reputation, like Tether does.
The issuer of a leading centralized stablecoin $USDT, Tether is now third-biggest cryptocurrency with $70 billion market cap (which means that there are 70 billion tethers in circulation).Tether had previously stated that every $USDT is backed by a dollar in a bank, but the 2019 New York Attorney General’s filing has shown that was not exactly true.
⚖️ Tether is owned by a company called Ifinex, which also counts Bitfinex exchange among its holdings. The NY investigation was alleging that Bitfinex handed $850 million to an offshore company without properly disclosing it to investors, after which Tether lent this amount out to Bitfinex, thus reducing the reserves backing tethers. The company denied any wrongdoing, but still preferred to settle with the NYAG for a tidy amount of $18.5 million.
💵 Tether’s reserves have been a major issue ever since. The investigation forced it to publish detail reserves reports, which have shown that tethers are backed not only by dollars, but also by “commercial papers” (unsecured form of promissory note that pays an interest), T-bills and some other assets.
This bear market has woken up old demons and an ongoing rumour is implying that commercial papers from mostly Asian companies make up a major part of Tether’s reserves, and they are now traded at a 30% discount.
💰 Tether is valiantly denying these rumours and in its yesterday’s statement pointed out that commercial papers make up less than 25% of the reserves, and the company pledged to reduce this controversial asset even further in the future. T-bills make up 47% of Tether reserves now, money market funds – 8%, cash and bank deposits – 5%, corporate bonds, funds & precious metals -4.5%, secured loans – 4%.
There are still some pending questions, like why Tether does not allow a public audit of its reserves, or whether its reliance on limited liquidity assets (even decreased) won’t cause it trouble… but as Tether’s CEO Paolo Ardoino pointed out, last month Tether’s clients redeemed $7 billion in only 48h without creating a liquidity problem.
Does it mean Tether can withstand even more difficult situations?