An investigative report by Bloomberg News has revealed that Tether makes a substantial amount of interest on its US Dollar reserves. The US Dollar reserves are kept in banks across several jurisdictions including Canada, the Bahamas and Puerto Rico. According to bank statements seen by Bloomberg, Tether earned at least $6.6 million in interest between January 2018 and July 2018, which potentially raises a question about whether Tether’s operating practices should benefit the company more than its users.
The report further reveals that while Tether may in fact have the cash reserves it claims, based on the contents of several bank statements leaked by an insider, many questions still remain unanswered regarding the source of the funds and their present location. CCN previously reported that the Commodities Futures Trading Commission (CFTC) issued a subpoena to the company amidst doubts about the veracity of its cash reserve claims. In the wake of this, a number of competing Stablecoins began popping up, including some marketing themselves as the fully audited and regulated ‘anti-Tether’.
Uncomfortable Questions
While the report provides a measure of insight into Tether’s notoriously opaque operations, the current status of the company’s finances remains a mystery. Till date, Tether has refused to allow its cash reserves to be audited and the bank statements seen by Bloomberg say nothing about how much Tether has in its reserve accounts – and where said reserve accounts are. The report only shows that Tether Ltd. has transferred USD and received USDT.
“That pattern shows up in the information Bloomberg reviewed. On July 6, Bitfinex sent 100 million digital coins to Tether Ltd., according to the blockchain. The same day, Tether paid Bitfinex $100 million, a Noble bank statement shows. On July 20, $50 million was exchanged for 50 million Tethers. On July 24, it was $100 million for 100 million coins.”
In other words at least theoretically, Tether could at the moment be running a fractional reserve system as famously alleged by a number of anonymous critics earlier this year. Until a comprehensive audited is commissioned, it remains impossible to discount this theory in its entirety.
Coupled with the fact that Tether effectively functions as a bank of sorts for crypto exchanges with no fiat banking relationships, this means that a huge segment of the crypto market which is dependent on Tether to achieve Crypto-Fiat liquidity could practically go up in flames at any time if indeed Tether is overstating its current cash reserves.
It will also not be lost on USDT users that the interest payments detailed in the bank statements seen by Bloomberg indicate that Tether was profiting from its cash reserves at the same time that uncertainty over their size and existence was causing its market performance to slip. Many will doubtless question whether it is morally or ethically right for the company behind the world’s largest Stablecoin to extract profits from the operations of the asset when it was at risk of losing its dollar peg and throwing the market into an upheaval.
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