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Introduction:
The veil surrounding Tether’s financial operations has been partially lifted as recently obtained legal documents shed light on the stablecoin issuer’s banking relationships and exposure to commercial paper. Tether, known for maintaining the largest stablecoin in the crypto market, has long faced scrutiny and speculation regarding the backing of its digital currency. These newly released documents provide a rare glimpse into Tether’s finances, revealing key details about its asset composition and banking partnerships.
Banking Relationships and Asset Allocation:
According to the documents reviewed by CoinDesk, Tether held funds in four banks, two investment management firms, two gold depositories, and its sister company Bitfinex as of March 2021. Additionally, the stablecoin issuer had investments in commercial paper and securities issued by various entities, including renowned financial institutions such as Qatar National Bank, Barclays Bank, Deutsche Bank, Emirates NBD Bank, and Natwest Group. Notably, a significant portion of Tether’s issuers consisted of Chinese banks and financial institutions, further diversifying its asset allocation.
Insights into Commercial Paper Exposure:
While Tether’s reliance on commercial paper was previously acknowledged, the extent of its exposure to this asset class was not widely known until now. The documents reveal that Tether used commercial paper and securities issued by prominent Chinese banks such as the Agricultural Bank of China, Bank of China Hong Kong, Bank of Communications, Industrial and Commercial Bank of China, China Merchants Bank, China Construction Bank, China Everbright Bank, and others to back its stablecoin. This insight underscores the company’s strategy and investment choices in maintaining the stability of its digital currency.
Limited but Crucial Financial Snapshot:
These documents offer a valuable, albeit limited, window into Tether’s financial operations. It is important to note that they do not conclusively prove or disprove previous claims of USDT not being fully backed during specific periods. Nevertheless, they contribute to the puzzle of Tether’s asset storage and provide some clarity to the crypto industry. Over the years, Tether’s banking relationships have been disclosed in fragments, making these newly released details an important step towards transparency.
Continuing Commitment to Transparency:
Tether’s settlement with the New York Attorney General’s office earlier this year marked a turning point in its journey towards increased transparency. In line with this commitment, the company pledged to publish information on its reserves for at least two years. The released documents include pie charts and specific U.S. dollar amounts, outlining the composition of Tether’s reserves. Commercial paper emerged as a significant component, alongside certificates of deposit, bonds, and other assets.
Conclusion:
The availability of these legal documents, secured after a protracted legal battle, represents a significant milestone in understanding Tether’s operations. While more comprehensive information about Tether’s reserves and financial practices is still desired, these documents provide valuable insights into the stablecoin issuer’s banking relationships and asset allocation. As the crypto industry evolves, transparency and accountability remain crucial to building trust and confidence among investors and market participants.
Disclaimer: CoinDesk is currently reviewing the documents to ensure the protection of individual privacy and redacting any sensitive information before releasing them in their entirety.
Note: This blog post is based on information obtained via CoinDesk.
