Tether Holdings Ltd. is once again under the spotlight as recent findings reveal that the company may have held securities issued by Chinese firms as part of its reserves backing its USDT stablecoin. Reports from Bloomberg News claim that Tether had investments in state-owned Chinese companies, such as Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., and Agricultural Bank of China Ltd. These findings were obtained from documents disclosed by the New York State Attorney General’s office.
This revelation comes in the wake of a Bloomberg investigation in October 2021, which found evidence that Tether’s reserves included billions of dollars in loans to Chinese companies. Despite denying any exposure to the debt of crisis-hit real estate developer China Evergrande Group, Tether did not clarify whether or not it held securities at other Chinese companies or issuers.
USDT is currently the largest stablecoin by market capitalization. However, its backing has been under scrutiny by regulators who question the underlying assets that provide its stability. In a February 2021 settlement with Tether, New York Attorney General Letitia James accused the company of not being fully backed by U.S. dollars at all times. She stated that Tether’s claims were misleading, and the company was operating in the “darkest corners of the financial system.”
In response to the claims regarding Chinese securities in its reserves, Tether published a blog post defending its position. The company argues that it has evolved significantly over the past two years, demonstrating its reserves’ liquidity and quality during major financial events in 2020 and 2022. As an example, Tether cites the repayment of US$7 billion in 48 hours in 2022, which accounted for nearly 10% of its reserves at the time.
While Tether’s response aims to reassure, the ongoing skepticism surrounding the company’s transparency keeps the issue alive. The alleged ties to Chinese securities raise questions on potential regulatory risks and the overall reliability of USDT. This situation could potentially lead to decreased confidence in the stablecoin marketplace and affect countless individuals and businesses that rely on the perceived stability of assets like USDT.
In conclusion, the revelations of Tether’s reserves being backed by Chinese securities maintain the importance of examining the underlying assets of stablecoins. The certainty of USDT’s backing and its ability to maintain stability is pivotal for the market and regulator relationships. As the crypto industry continues to grow, transparent and regulated practices will undoubtedly contribute to overall confidence and stability.
Source: Cryptonews
