Tether’s Financials Get Released

At an $83 billion market cap, Tether (USDT) is the largest stablecoin in the world. It takes up a massive 65% of the entire stablecoin market and growing in the wake of uncertainty surrounding competitors USDC and BUSD.

In simplest terms, USDT is the most important stablecoin in existence. If it fails, the effects on crypto would be cataclysmic.

Given Tether's immense scale and influence throughout the cryptocurrency economy, there have been numerous attempts to decipher the assets that back it. However, Tether has largely maintained a shroud of secrecy around its operations.

Tether may either represent a secure entity, substantiated by evidence that each USDT token in circulation is backed by at least a dollar's worth of assets. Alternatively, Tether could be inadequately backed, or worse, a fraudulent operation potentially exceeding the scale of FTX.

Over the years, the reality has remained uncertain.

But now, thanks to obtained 2021 documents by the New York Attorney General’s Office, we finally gain some insight into Tether's activities.

As you’d expect, it’s complex:

• It had $35.5 billion in various banks and financial institutions and $5.1 billion lent out for a total of $40.6 billion, which matches up well with USDT’s $40.8 billion market cap at the time

• Of the $35.5 billion in banks and institutions, more than $26 billion was in the Bahamas-based Deltec Bank and Trust, a small bank in Nassau

• And of that $35.5 billion, 85% was in commercial paper, including Chinese commercial paper

• The $5.1 billion in loans were made using USDT and secured with collateral in the form of digital assets, such as Bitcoin and Ethereum

Basically, Tether was fully-backed, but its assets were in weird Bahaman banks, Chinese commercial paper, or sketchy loans.

What heightens the concern is that some of the banks from which Tether purchased commercial paper have a dubious history. Reportedly, one such bank is a subsidiary of a Qatari institution known for violating anti-money laundering protocols and providing services to extremist and terrorist groups.

Tether says the whole thing is a big nothing burger since the documents are two years old and they’ve never failed, but to us, something doesn’t feel right here.

If everything’s truly well and good, why do they go to such lengths to keep everything secret? Sure, Tether hasn’t failed yet, but neither did FTX, or Celsius, or Luna until they did.

So, we are going to leave you with the same advice we give pertaining to Binance: proceed with caution, and don’t trust, verify.

And again, there’s no reason to be holding USDT (or any stablecoins for that matter) long-term. To dodge the potential risk, especially at a time when the SEC is aggressively going after anything and anyone, only use stablecoins to quickly move in and out of positions if and when needed.