Stablecoin issuer Tether made headlines as it reported a whopping $1.48 billion in net profit for Q1 2021, doubling the previous quarter’s result. In a surprising move, the company also detailed its bitcoin (BTC) and gold holdings in its consolidated reserves report, disclosing that it held $1.5 billion worth of bitcoin and $3.4 billion in gold as of March 31.
Tether’s Q1 success comes after a rather unstable period for the stablecoin market valued at $131 billion. Major tokens such as Circle’s USDC suffered a hit when the U.S. banking crisis caused them to lose their dollar pegs. Moreover, while the New York Department of Financial Services asked fintech firm Paxos to cease issuing its Binance USD (BUSD) stablecoin in February, many have seen Tether’s USDT – the largest stablecoin with an $81.8 billion supply – as a clear winner in the turmoil.
Despite its soaring market capitalization and 24% growth since the beginning of 2021, Tether’s USDT has not been exempted from scrutiny. Perceived as a safe haven due to its clean record with the SEC and peg safety, critics have continuously pointed out the lack of transparency on the company’s reserve assets and controversial maneuvers.
The first quarter’s attestation, signed by financial services firm BDO Italia, discloses that T1s>ether held $2.44 billion in excess reserves out of the $79.4 billion worth of Tether-issued tokens in circulation at the end of March 2021. Committing to increased transparency, Tether’s CTO Paolo Ardoino promised that the firm would divest entirely from secured loans in its reserves (reduced by $500 million in Q1) before the year ends.
For years, industry insiders have criticized Tether for a lack of clarity on its reserve assets. Last year, a U.S. judge ordered the firm to produce documents about USDT’s backing as part of a lawsuit alleging Tether’s involvement in inflating BTC’s price with freshly-issued stablecoins.
Now boasting about 85% of its reserve assets held in cash, cash-like assets, U.S. Treasury bills, and bank deposits, Tether is making attempts to provide more transparent information to its users. But, at the same time, the transparency-related concerns and its potential impact on the cryptocurrency market leave many wondering if Tether’s latest successful quarter will be sustainable in the long run.
Source: Coindesk
