Tether – the issuer of the world’s largest stablecoin, USDT – has released a statement responding to the Wall Street Journal (WSJ)’s latest claims about the status of its reserves.
It labeled the outlet’s assertions as “a series of unsubstantiated conclusions” seeking to discredit Tether’s attempts to remain transparent with the public.
Claims from WSJ
In an article published on Saturday, WSJ reviewed parts of Tether’s history and accounting process that make its reserve dependability seems less than ideal.
One criticized element involves Tether’s use of attestations, rather than audits, for providing transparency surrounding its reserve makeup.
Attestations show a snapshot of a given firm’s assets and liabilities at a specific date and time, as signed off by an accounting firm. Tether’s most recent attestation was from BDO, a top 5 accounting firm, confirming that the company held $66 billion in reserves as of June 30th, 2022.
However, attestations of this sort can leave room for firms to fudge the numbers of their balance sheet. That’s because they don’t provide information about a firm’s assets before or after the attestation date.
The WSJ noted that in 2017, Tether was sued by the CFTC for skewing its attestation numbers after its sister company Bitfinex transferred $382 million to its bank account hours before the review period.
The journal also suggested that Tether could be rendered “technically insolvent” if the value of its assets were to fall by just 0.3%. Its Q2 attestation reported $67.7 billion in assets versus just $67.5 billion in liabilities, leaving little wiggle room.
Other criticisms were related to Tether’s use of “digital tokens” in its reserve makeup, and USDT’s temporary de-peg to $0.95 after the Terra fallout in May. The stablecoin panic was largely responsible for Tether needing to support billions of redemptions in May, thus shrinking its balance sheet considerably.
In a statement on Tuesday, Tether denied that there were any internal issues at Tether during the de-pegging event.
“Tether stands by the fact that it was able to easily redeem over USD 16B of the issued token in recent months, keeping essentially the asset allocation in line with the previous months while significantly reducing its exposure to commercial papers,” said the firm.
Tether’s latest attestation report said it held just $8.5 billion in commercial paper as of June 30th, down from $20 billion in Q1. It plans to reduce this allocation to $200 million by Wednesday, and to zero by the end of 2022. Meanwhile, digital token holdings only amounted to $200 million by the end of Q2.
The company also reasserted that it is working towards a full audit and that claims of other stablecoin issuers being “audited” are untrue.
Furthermore, other stablecoins contain a similar margin of assets to liabilities, making them equally open to the risk of becoming “insolvent.”
“To attack Tether’s reserves… highlights an agenda by the publication to single out Tether and hurt its reputation,” continued the company.