Know the Dark Side of the Stable Coin Tether About Digging Its History

According to documents made public by the Attorney General of New York, Tether Holdings Ltd. previously included securities produced by Chinese corporations as backing for its USDT stablecoin, the largest in the world.

The stablecoin issuer had been the subject of rumors for years that Tether encountered Chinese commercial paper. According to a Bloomberg study that was released in October 2021, Tether’s reserves really included many large loans to the cryptocurrency platform Celsius Network as well as billions of dollars in short-term funding to Chinese businesses. At the time, Tether refused to answer whether it had securities from any Chinese companies or issuers but claimed it did not have any relationship to the debt associated with the crisis-hit China Evergrande Group.

Given the significant role USDT plays in the crypto markets, the quality of the assets that support it has long been under close examination. The stable coin, which has an estimated $83.5 billion in circulation, is used by traders to move funds into and out of the cryptocurrency markets, shift cash across exchanges, and act as a safe haven during periods of severe volatility. The trust in crypto assets could be shattered if Tether was unable to convert the tokens into dollars.

Knowing the Past

Tether, which settled with the New York AG’s office in February 2021 on claims that it misrepresented its reserves and concealed losses, gave letters, financial accounts, reserve investments, and wallet information via the regulatory firm Steptoe.

The materials were made available by the NY AG as a reaction to a liberty knowledge request by Bloomberg News, which came after a previous request from the cryptocurrency publication Coin Desk.

According to a blog post published by the company on Friday, “Tether is in an entirely novel position compared to two years ago.” “It showed, leading the marketplace during the most significant black swan events that happened in the year 2020 as well as 2022, that its reserves are highly liquid, of excellent quality, and willing to be made accessible for supporting any size of redemption.” Tether reported not having any Chinese commercial paper in July of last year. Additionally, it disclosed that its total position in commercial paper had decreased to $3.7 billion and that it intended to close the position entirely within a short period of time.

China Construction Bank Corp., Agricultural Bank of China Ltd., and Industrial & Commercial Bank of China Ltd., are just a few of the significant state-owned Chinese corporations whose securities Tether once held, according to records made public by the NY AG. The individual stocks’ listing records do not indicate when Tether held them. The bonds become due in 2020 or 2021.

According to the records in the market, the Tether also owned securities. These securities were issued by businesses that are like Deutsche Bank AG, ArcelorMittal SA and Barclays Bank Plc,. To safeguard their linkages with assets like the US dollar, stable coin issuers like Tether claim that the tokens they own are supported on a one-to-one basis primarily with cash and cash equivalents. Although they are significantly less popular than USDT nor the second-largest token, USDC, stable coins that depend upon other processes exist as well.

Dispute historical rumors. The USDT issuer has made sizable loans to third parties, according to documents outlining its relationships with banks, financing, and investments made with reserve funds as of the last day of March 2021, which also noted accounts held at a number of different Bahamian institutions.

In the cryptocurrency world, Tether’s loan scheme was significant. Comparatively, as of March 2021, Genesis Global Capital, one of the biggest borrowers in the digital asset market, claimed $9 billion in total active loans.

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