Tether’s balance sheet is in such a position that even a drop in value of its reserve assets could make it technically insolvent, says a Wall Street Journal report. It highlighted the cloudy nature of Tether’s USDT reserves. Its long-awaited audit has been in the works since 2017.
Tether, following its collapse, has been touting its transparency in marketing blogs and press releases. The company behind the world’s largest stablecoin, USDT, is designed to grease the rails of around the $1 trillion cryptocurrency market – it promises that each token can be redeemed for $1. However, market observers have drawn questions about the firm’s reserves being sufficient and calling for audited information. Paolo Ardoino, the chief technology officer of Tether Holdings, had said that an audit is likely months away. He shared that things going slower than they would like.
The report says that Tether publishes an attestation signed off by its accounting firm. Bitfinex had skewed a 2017 attestation of Tether. The Commodity Futures Trading Commission (CFTC) said it transferred $382 million to its bank account just hours before the accountants checked the numbers. It should be noted that Tether, without admitting or denying the allegations, settled the case with the US regulator. John Reed Stark, the former head of internet enforcement at SEC, said Tether needs an audit like a corporate colonoscopy – that tells investors everything about what’s in the reserves. The report highlights that audits can help investors understand the risks they are running, such as Voyager Digital’s accounts showed that the lender had a slim cushion to protect it in the event of a downturn.
The constitution of Tether is important for investors as the token operates with a thin cushion of equity. This reflects its assets minus the liabilities.
