Category: Tether

An independent review from global accounting giant BDO has reported that the stablecoin issuer’s total assets exceed its consolidated liabilities. Will the FUD finally go away or stick around independent of evidence?

Top Five Accounting Firm Gives Stamp of Approval

Tether has made available its latest quarterly assurance opinion completed by BDO, a top five-ranked global independent public accounting firm. The attestation reaffirms the accuracy of the firm’s reserves report, which breaks down the assets held by the group as of June 30, 2022.

As of that date, BDO confirmed a more than 58 percent decrease in Tether’s commercial paper holdings over the prior quarter, from US$20 billion to US$8.5 billion. During the same period, the company increased its holdings of cash and bank deposits by 32 percent.

The attestation revealed a continued reduction in commercial paper investments and is said to demonstrate that “the group’s consolidated assets consistently exceed its consolidated liabilities, despite market capitulation in Q2 2022, which led to cascading failures across the industry”.

Further, the note suggests that “emerging from this black swan event [market capitulation, kicked off by Luna], Tether demonstrated its resiliency and continued commitment to transparency, dependability and commitment to removing commercial papers from reserves”.

Management noted that as of June 30, total assets exceeded total liabilities, and highlighted a figure of US$66.2 billion in relation to digital tokens issued.

Paolo Ardoino, Tether CTO, said:

We are fully committed to maintaining our role as the leading stablecoin in the market. Our commitment to transparency and the community is a longstanding pillar in the underlying ethos of the company and aligns with our responsibility as a market leader. We have once again demonstrated that commitment by aligning with BDO, one of the world’s top accounting firms.

Paolo Ardoino, CTO, Tether

‘Tether Truthers’ Silenced

So-called “Tether Truthers” have long asserted that Tether is a fraud and that its collapse would result in the entire crypto market unravelling. To date, that has proven to be a belief lacking in credence, even more so after this latest attestation.

This news would have been poorly viewed by at least one hedge fund, which accumulated a massive short position betting on its its decline. It seems no matter the evidence provided, Tether FUD is one of those persistent issues that are hard to dispose of, once and for all.

Stablecoin issuer Tether is set to launch a stablecoin pegged to the British Pound Sterling in early July, using Ethereum as the first support blockchain.

According to a June 22 blog post from Tether, the GBPT will have a 1:1 ratio to the Pound Sterling and will provide a faster and less costly way of transferring assets:

UK ‘Next Frontier’ for Blockchain Innovation

Tether executives are reportedly working with UK regulators to prepare the next steps for rolling out the GBPT. Paolo Ardoino, CTO of Tether, cites the UK as the “next frontier” for blockchain innovation.

We believe that the UK is the next frontier for blockchain innovation and the wider implementation of cryptocurrency for financial markets. We hope to help lead this innovation by providing cryptocurrency users worldwide with access to a GBP-denominated stablecoin issued by the largest stablecoin issuer,

Paolo Ardoino, CTO, Tether

Welcome to the Family

The GBPT joins the family of fiat currency-pegged stablecoins from the company, which also includes the recently launched MXNT, the Mexican Peso-pegged stablecoin.

On May 31, Tether announced that USDT had been integrated into Polygon, one of the largest Ethereum sidechains, providing more than 19,000 applications on the Polygon ecosystem with the ability to use USDT.

Tether is expanding its family of stablecoins at the same time that the company is denying claims that its commercial paper portfolio is mostly backed by Chinese commercial paper, the reason why a US$4 billion hedge fund has placed a short bet against Tether.

Fir Tree Capital Management has its sights firmly set on shorting the stablecoin Tether amid regulatory scrutiny and fears regarding ties with the Chinese debt market. The firm will hedge an asymmetric bet that will limit the downside but if it proves correct, will be enormously profitable:

New York-based Fir Tree has over US$4 billion under management and has structured its position on Tether (USDT) as an “asymmetric trade”, which means the downside risk is small and the potential payoff is large. The fund started to explore taking a short position on USDT in July 2021, reasoning that much of the token’s US$24 billion in commercial backing is tied to Chinese real-estate developers, which are currently struggling.

Therefore, if the paper loses value, it will lead to a potential big drop in Tether’s reserves and the coin’s price. Fir Tree had previously said that betting on this decision could generate profit within 12 months.

Chinese Real-Estate Market Facing Massive Debt Issues

The entire Chinese real-estate market is facing debt of its own, led by the China Evergrande Group, whose liabilities exceeded US$300 billion as of December 2021 when it missed a payment deadline. Tether, the company, has indicated that it does not own any commercial paper linked to Evergrande, but it has been reported that Fir Tree expects some of the commercial paper it does own to lose value.

Tether’s Reserves in Question

Many have queried of late whether Tether has enough cash reserves to back itself. The stablecoin’s quarterly assurance opinion published last month showed a decrease of 21 percent in commercial paper holdings over the past quarter.

In May last year, Tether released a breakdown of its reserves for the first time since 2014, which indicated that as of March 2021, the company held almost 76 percent of the its reserves in cash or cash equivalents. In this category, commercial paper comprised the majority, with 65 percent.

Tether has previously claimed it was 100 percent cash-backed, but the breakdown of the company’s reserves showed that less than 3 percent were actually held in cash. In October, Tether faced a US$41 million fine for lying about its reserves.