USDT restores dollar peg as Tether denies ties to FTX, confirms liquid reserves

abdelaziz Fathi

World’s largest stablecoin issuer, Tether has distanced itself from of the liquidity crisis that engulfed the crypto exchange FTX and its trading arm Alameda Research, saying they have no exposure to Samuel Bankman-Fried’s crypto empire.

Tether

Tether’s CTO Paolo Ardoino also posted a thread to explain the relationship between FTX and its USDT token to clear any fears and uncertainty among market players. He explained that Alameda has issued and redeemed a lot of USDT in the past, but they have no credit exposure that has matured with the struggling crypto trading firm.

Tether, which is closely affiliated with crypto exchange Bitfinex, also revealed that it has drastically reduced its holdings of commercial debt in its reserves over the last six months. Instead, the stablecoin issuer allocated most of its non-fiat reserves to Treasury bills, almost doubling assets in short-term government securities. US treasury bills now make up a significant portion of Tether’s reserves with a direct exposure of over 58 percent.

As the company continues to face questions about what its USDT token is actually backed by, Tether has been reducing the amount of corporate debts in its reserves. Per its latest report, commercial papers made up just 0.07% of Tether’s total holdings compared to 44% a year earlier.

As of September 30, 2022, Tether disclosed that 82 percent of its reserves were held in cash, cash equivalents and other short-term deposits. The stablecoin issuer claims that it has reduced its commercial paper exposure by more than $24 billion with no losses over the course of 2022.

Tether’s latest quarterly assurance opinion was completed by BDO, a top five-ranked global independent public accounting firm.

Tether officially began working with BDO Italia in July 2022 for its quarterly attestations. With this alignment, the issuer is moving towards the release of its attestations from a quarterly basis to monthly reports.

Tether seeks to reassure investors that its cryptocurrency is backed by U.S. dollars after the major stablecoin has been dogged by speculation that it holds insufficient capital to support its market cap of USDT.

Onboarding a major accounting firm, which can be held accountable by third parties for financial information, to engage in an audit of a crypto token was also a notable success for Tether’s initiative. The developing nature of the cryptocurrency industry, combined with the lack of regulatory oversight, makes the potential risk associated with a comprehensive audit of USDT or any other crypto asset too high for accountancy firms.

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