- Tether to launch live reserve data.
- USDT is running an overcollateralized reserve balance.
- The NYAG accused Tether of fraud and deception in 2021.
Stablecoins have become a critical part of the cryptocurrency ecosystem, allowing traders to park funds in fiat-pegged tokens during market volatility and sometimes offer holders cash redeemability. Of the many stablecoins on the market, Tether’s USDT remains the most popular, boosting a market capitalization of around $84 billion.
Despite its dominance of the stablecoin sector, USDT has drawn sustained lingering doubts about whether the company can fully meet its liabilities. However, to soothe these long-running doubts, Tether is set to launch live reserve data.
Speaking to Bloomberg, Tether CEO Paolo Ardoino addressed ongoing concerns over the company’s reserves by stating that plans are in place to publish live reserve data from next year.
Tether already publishes a daily report on the reserves of each of its five stablecoin offerings. As of October 20, USDT showed assets of $87.22 billion vs. liabilities of $83.93 billion, equating to an approximate 4% overcapitalization.
The company also makes quarterly auditor reports easily accessible on its website. The most recent auditor report for June 30 shows that 85% of Tether Holdings’ assets relate to cash, cash equivalents, and short-term deposits. The remainder comprises less liquid assets, including Bitcoin, precious metals, and secured loans.
Tether aims to prove its transparency and financial stability by providing real-time reserve data designed to reduce the persistent doubts about its USDT token. However, considering the New York Attorney General’s (NYAG) investigation into the company, critics would argue that a healthy dose of cynicism is justified.
The company was banned from operating in New York and ordered to submit quarterly reserve reports following an investigation by the NYAG that concluded in February 2021. The NYAG found that Tether and its parent company, Bitfinex, were guilty of fraudulent and deceptive practices, including discovering that USDT was not 1-to-1 backed with dollars, as claimed.
Tether settled the lawsuit for $18.5 million without admitting any wrongdoing on their part. The settlement terms required Tether to make public disclosures to substantiate its reserves and provide greater transparency, among other requirements.
On the Flipside
- Audits are not guarantees of sound financial and accounting practice, with the Enron-Arthur Andersen scandal illustrating this point.
- USDT’s market cap continues to grow, suggesting it is the most trusted stablecoin.
- The passing of the Monetary Authority of Singapore’s stablecoin framework in August, among other acts globally, suggests that stablecoins are increasingly acknowledged as a legitimate payment method.
Why This Matters
Tether has already gone the extra mile by incorporating daily reserve reports on its website; a live reserve report does not offer substantially more assurance than the existing setup, suggesting a degree of overcompensation, likely due to the company’s past indiscretions.
Learn more about Paolo Ardoino’s recent appointment as Tether boss here:
Former Tether CTO Paolo Ardoino Takes the Helm as CEO
Find out why fresh centralization accusations are being levied at the Solana blockchain here:
Solana Flamed for Its Closed-Source Centralized Nature