Tether’s bank says that every stablecoin USDT is backed by its reserve
Deltec, Tether’s banking partner, said that the USDT is fully backed by its reserves, minimizing concerns about the integrity of the stablecoin.
Tether Ltd, the Bitcoin Evolution company behind the stablecoin of the same name, has long been accused of lacking transparency about its reservations. In 2019, Tether’s lawyers even admitted before the New York prosecutor that each USDT was only guaranteed up to 74%.
More recently, an article on Medium entitled „The Bit Short, Inside Crypto’s Doomsday Machine“ was published by an anonymous observer and raised several concerns about the most popular of the Stablecoins.
The USDT’s total capitalisation has risen from $4 billion to $25 billion in the last 12 months. Thus, Tether Ltd must hold as many assets on its balance sheet to ensure the convertibility and value of the Tether since USDT = USD 1.
Thus, this anonymous author stated that all foreign currencies held by Bahamian domestic banks only increased by $600 million between January and September 2020 while Tether Ltd issued about $5.4 billion USDT over the same period. Thus, the spread could suggest that the stablecoin is not 100% backed by the dollar.
We can read in the article on Medium :
„There were not enough dollars in all banks in the Bahamas to support the Tether’s money creation“.
👉 Find our guide: What is the Tether (USDT) and how to buy it?
Bank refutes allegations
Tether’s banking partner Deltec Bank has refuted these accusations. Gregory Pepin, deputy CEO of the bank said in an interview :
„Each USDT is backed by a reserve and that reserve is greater than the number of Tether’s outstanding. »
According to Gregory Pepin, the author of the article Medium was looking for Deltec’s assets in the wrong place. He explained that the Bahamas has a so-called offshore jurisdiction and that there are two categories of banks, namely national and international. Thus the observer would not have had access to the right documents to assess the bank’s balance sheet. He explained :
„If the author had made a small effort to delve into the size of the Bahamian banking market, he would have discovered that the country’s banks hold about $200 billion in assets. And we’re part of that.
While Gregory Pepin responded to the allegations in an informal interview, Tether and his sister company Bitfinex will have to answer the charges before the New York State Attorney General in the coming months. Both companies will have to prove to the court that the stablecoin is indeed secured by reserves.