CoinDesk published a report yesterday evening (16) questioning the security of Tether's asset reserves. Affected by this report, USDT once dropped by more than 0.7% to $0.992 within 5 minutes. Tether officials quickly responded to this, emphasizing the recent outstanding performance in revenue in order to restore community confidence.
Tether, the issuer of the stablecoin USDT, agreed yesterday (16) to the "Freedom of Information Act" request made by the media CoinDesk in 2021, and disclosed to CoinDesk the investigation documents collected by the New York Attorney General's Office (NYAG) at the time.
Last night (16th), Tether officially issued an announcement to respond to this matter again.
CoinDesk believes that Tether’s previous commercial paper holdings are risky
After receiving the NYAG's investigation documents, CoinDesk published a report questioning the security of Tether's funds, especially the commercial paper held by Tether. The NYAG investigation documents show that as of March 2021, Tether owns commercial paper and other securities issued by different entities such as Qatar National Bank QPSC, Barclays Bank PLC, Deutsche Bank AG, Emirates NBD Bank PJSC and Natwest Group PLC.
The report stated that a large proportion of the issuers were various banks and financial institutions in China. Tether’s first public document listing the composition of its reserves, released in May 2021, showed that nearly half (49%) of the collateral for USDT loans at the time was unspecified commercial paper.
Tether keeps its funds at Ansbacher (Bahamas) Limited and Capital Union Bank in the Bahamas and Far Eastern International Commercial Bank in Taiwan. However, the vast majority of its assets are located at Deltec Bank and Trust in the Bahamas, exceeding $26 billion as of March of that year.
Ansbacher released a portfolio report that further revealed the potential risks of commercial paper, showing that nearly 85% of Tether's assets held at the financial institution are commercial paper. 13.7% are corporate bonds, while the rest are riskier high-yield bonds, floating rate notes and credit accounts.
In addition, according to a letter from Tether’s external counsel, the NYAG office still has questions about the commercial paper held by Tether after the settlement. The letter revealed the potential trick:
Regarding Tether's holdings of commercial paper assets, Tether pointed out in our previous communications that it has accounts with different banks. Tether asks these banks to provide quotes, but these banks in turn ask brokers and other counterparties to provide these quotes. These counterparties either trade directly with issuers to issue commercial paper or trade in the secondary market to purchase commercial paper.
USDT plunged more than 0.7% in five minutes
According to CoinGekco data chart, after the CoinDesk report was issued, the price of USDT once dropped by more than 0.7% in 5 minutes, hitting a low of $0.992, but soon rebounded to today's average price. However, before the deadline, USDT has almost returned to the peg, with a price of $0.9998.
Tether emphasizes asset security and responds to FUD
Tether officials quickly responded to CoinDesk’s negative report. According to Tether’s official announcement, Tether listed three reference points to help users re-understand the data mentioned in the CoinDesk report:
In the disclosed documents, Tether’s bank statements show the integrity of its banking relationships and asset reserves, as guaranteed by independent third parties that we have publicly disclosed.
These statements show how Tether applies first-class asset management concepts: short-term investing and diversification, which is clear from the investments listed in the various bank statements.
These materials do not represent Tether today (as the data received by the media outlet only provides a view of data older than 2 years). Furthermore, Tether reduced its commercial paper holdings to zero by mid-2022 and significantly reduced its secured loan portfolio.
To further dispel users' concerns about the safety of Tether assets, Tether said it had completed the promised quarterly report after reaching a settlement with the New York Attorney General's Office. It also mentioned the recent progress in revenue, with Tether's current net profit reaching a record high of $1.48 billion, which also brought Tether's reserve surplus to a record high of $2.44 billion, while bank deposits also decreased by more than 90%.
The attestation also shows that Tether remains committed to reducing its secured lending to zero, from 8.7% to 6.5%, and that Tether’s U.S. Treasury holdings reached an all-time high of over $53 billion — more than 64% of its total reserves. Additionally, the majority of our commercial paper remains rated A2 or higher. Nothing has changed from our past statements. We remain steadfast in our commitment to accountability and maintaining the highest standards.
