Tether Reduces Counterparty Risk as Market Cap Grows

In the first quarter of 2023, the stablecoin operator Tether Holdings withdrew over $4.5 billion from banks, resulting in a “substantial reduction” in counterparty risk, the company reported in a blog post touting its latest attestation by BDO Italia.

Tether’s market capitalization increased from $66 billion to over $82 billion in the first quarter, while its bank deposits decreased from $5.3 billion to $481 million, a reduction of over 90%.

Tether stated that the remaining bank deposits are dispersed across several banks, referring to its rivals who have suffered losses as a result of recent bank failures.

Simultaneously, Tether increased its holdings of United States Treasury bills to $53 billion, or 64% of its reserves.

In conjunction with other assets, Tether’s USDT token is now backed by 85 percent cash, cash equivalents, and short-term deposits “that can be sold rapidly to process redemptions.”

This includes more than $7,500,000,000 in repo facilities. In addition:

“Decade-high yield rates drive revenues up, increasing Tethers surplus reserves, effectively overcollateralizing USDT.”

Tether disclosed its holdings of gold and Bitcoin for the first time in this quarter’s attestation to demonstrate its commitment to transparency, the company said.

It highlighted its superior financial performance in comparison to other companies, naming BlackRock, Netflix, Starbucks, Cash App, and PayPal as those whose quarterly profits it exceeded.

Tether has labored diligently for months to improve its financial indicators and highlight its achievements.

It announced in June that its commercial paper reserves would be reduced from $20 billion to $8.4 billion by the end of the month and to zero by the end of the year. It achieved its objective successfully.

Tether, which is owned by Hong Kong-based iFinex, has faced financial suspicions and allegations.

When the massive China Evergrande Group experienced a financial crisis, there were rumors that Tether had large investments in Chinese commercial paper.

The New York attorney general’s office fined Tether $18.5 million in 2021 for misrepresenting the fiat backing for its reserves. The settlement also required the stablecoin issuer to increase its financial transparency.

John Reed Stark, the former head of the SEC’s internet enforcement office, referred to Tether as “a mammoth house of cards” in a lengthy “terrific and civil exchange of ideas” on Twitter with Tether’s chief technical officer Paolo Ardoino this month.

Stark noted that Tether had promised to conduct a comprehensive audit within “months, not years,” in 2021, which has not occurred.

Typically, an attestation, such as the one published this quarter, is more narrowly focused and does not offer an outside opinion on the financial health of the company.