Concerns surrounding the reserves backing USDT, a U.S. dollar-pegged stablecoin issued by Tether, have been brought to light with documents obtained from the New York Attorney General’s Office. These documents confirm suspicions that Tether’s USDT stablecoin was backed by Chinese securities, including assets belonging to Chinese companies and debt issued by the Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., and Agricultural Bank of China Ltd.
While Tether has rejected claims in the past that up to 85% of its commercial paper portfolio was backed by short-term debt from Chinese or Asian companies, the latest documents contradict these denials. Moreover, Tether held securities issued by foreign businesses such as Deutsche Bank and Barclays Bank to support its reserves.
Despite the evidence, Tether’s chief technology officer Paolo Ardoino maintains that the documents prove critics wrong on claims of Tether lacking a bank account. In addition, Ardoino denies accusations of Tether holding onto debt from the distressed Chinese property developer Evergrande.
The origin of these documents can be traced back to an investigation by New York Attorney General Letitia James in April 2019. James’ office probed whether crypto exchange BitFinex was concealing around $850 million in losses from investors, including about $700 million in Tether reserves as part of what she called BitFinex’s “slush fund.” The case was settled in February 2021, with both parties barred from conducting business in New York.
Initially resistant to relinquishing access to the investigative documents, Tether eventually relented on June 15 and cited transparency as the reason for its decision. In a statement on the company blog, Tether expressed suspicion about the timing of the materials being handed over to CoinDesk, raising questions about potential collusion within the industry.
The revelation of Chinese securities backing USDT raises questions about the safety and legitimacy of the stablecoin. While Tether’s claims of transparency appear genuine, skeptics might wonder if there are other undisclosed aspects of Tether’s operations that could impact its future and the cryptocurrency market at large. Nonetheless, these findings underscore the significance of transparency in an industry that has often faced scrutiny for its secretive nature.
Source: Decrypt
