Deltec, Tether’s banking partner, said the USDT is fully secured by its reserves, minimizing concerns about the integrity of stablecoin.
Tether Ltd , the company behind the stablecoin of the same name, has long been accused of lacking transparency about its reserves . In 2019, Tether’s lawyers even admitted to the New York prosecutor that each Bitcoin Code was only 74% guaranteed .
More recently, an article on Medium titled „The Bit Short, Inside Crypto’s Doomsday Machine“ was posted by an anonymous observer and raised several concerns about the most popular stablecoin.
The total capitalization of the USDT has grown from $ 4 billion to $ 25 billion in the past 12 months. Thus, the company Tether Ltd must hold as many assets on its balance sheet to guarantee the convertibility and the value of Tether since 1 USDT = 1 USD.
So, this anonymous author said that all foreign currency held by the national banks of the Bahamas only increased by $ 600 million between January and September 2020 while the company Tether Ltd issued around $ 5.4 billion USDT. over the same period. So, the spread could suggest that stablecoin is not 100% dollar backed.
We can read in the article on Medium:
„There weren’t enough dollars in all the banks in the Bahamas to support Tether money creation .“
Bank denies allegations
Bank Deltec, Tether’s banking partner, has refuted these accusations . Gregory Pepin, deputy CEO of the bank said in an interview:
“Each USDT is backed by a reserve and that reserve is greater than the number of Tether in circulation.“
According to Gregory Pepin, the author of the Medium article was looking for Deltec’s holdings in the wrong place. He explained that the Bahamas have a so-called offshore jurisdiction and that there are two categories of banks namely national and international. Thus the observer would not have had access to the right documents to assess the bank’s balance sheet . He explained :
“If the author had made a small effort to dig into the size of the Bahamian banking market, this person would have discovered that the country’s banks hold around $ 200 billion in assets . And we are part of it ”.
While Gregory Pepin responded to the observers‘ claims in an informal interview, Tether and its sister company Bitfinex will have to respond to the charges before the New York State Attorney General over the coming months. The two companies will have to prove to justice that the stablecoin is well guaranteed by reserves.