After FTX’s Fall, Tether’s Reserves Raise Concerns

Tether (USDT), the world’s largest stablecoin, promises a simple value proposition: one USDT is always backed by one US dollar. This stability is crucial for cryptocurrency traders, allowing them to move in and out of positions without the volatility of other digital assets. However, questions have long swirled around Tether’s reserves, the pool of assets supposedly mirroring the number of USDT in circulation. Recent news and the company’s own white paper raise concerns about the transparency and legitimacy of Tether’s claimed 1:1 backing.

News Paints a Different Picture:

In 2021, Tether was fined $41 million by the Commodity Futures Trading Commission (CFTC) for misrepresenting its reserves. This penalty suggests a discrepancy between Tether’s past claims and the reality of their reserves. Further fueling the fire, news reports allege Tether printed more USDT during periods of market stress, potentially without a corresponding increase in reserves (Source: link).

Tether’s Whitepaper: Transparency or Obfuscation?

Tether’s white paper outlines a “Proof of Reserves” system (you can download white paper of tether from: link). Here’s a breakdown of what it claims:

  • Solvency Equation: The core principle is a simple equation – TUSD (total USDT issued) equals DUSD (dollar value of reserves). This implies that for every USDT in circulation, there’s a corresponding dollar in the bank.
  • Verification Methods: Tether relies on two methods for verification:
    • Audits: The white paper mentions periodic audits by professional auditors to verify the bank balance. However, the details of these audits, such as frequency and scope, are absent.
    • Public Disclosure: Tether claims to publish their bank account balance on a Transparency page. This, however, offers limited insight since it doesn’t reveal the composition of the reserves (cash, other assets).

Is Tether the Next FTX?

The collapse of FTX, another major crypto exchange, and the subsequent fraud charges against its founder, Sam Bankman-Fried, sent shockwaves through the industry. While the situations differ (FTX dealt with a wider range of crypto assets), Tether’s potential lack of transparency raises similar concerns about the stability of a linchpin in the cryptocurrency ecosystem.

Unlimited Money Machine or Simply A Lack of Clarity?

Tether’s ability to mint new USDT without demonstrably increasing reserves raises questions about whether it’s a legitimate stablecoin or a potential mechanism for creating “unlimited money.” While the accusations don’t definitively prove such a scheme, they highlight the lack of transparency surrounding Tether’s reserves.

Offshore Operations

Tether and Bitfinex are intricately linked, with Tether being the stablecoin issued and Bitfinex being a major exchange where USDT is traded, neither company is actually a US entity. According to Wikipedia, Tether Limited is owned by the British Virgin Islands-based company iFinex Inc., which also owns the Bitfinex cryptocurrency exchange. This offshore structure places them outside the direct regulatory purview of the US Securities and Exchange Commission (SEC) and other US financial watchdogs. This lack of US oversight adds another layer of complexity and potential risk to the Tether/USDT situation, as it makes it harder for US regulators to enforce financial regulations on these companies.

The Verdict: A Cloud of Uncertainty

The discrepancies between Tether’s white paper and news reports raise serious doubts about the true state of their reserves. The lack of transparency in audits, the limited disclosure of reserve composition, and the allegations of minting without proper backing all contribute to this uncertainty. While not a confirmed case of fraud like FTX, Tether’s situation demands closer scrutiny from regulators and independent auditors. Only then can investors have confidence in the stability of Tether and the wider cryptocurrency market.


The views expressed in this article are solely my own and do not necessarily reflect the views of any other individual or organization. The information presented is based on my interpretation of publicly available news articles and the Tether white paper.

While I have strived to provide accurate information, I cannot guarantee the veracity of all claims made by third parties. This article is for informational purposes only and should not be taken as financial advice. It is recommended that you conduct your own research before making any investment decisions.

This article is not intended to defame Tether or any other entity. It aims to present a balanced analysis of current concerns surrounding Tether’s reserves.

1200 899 admin

Leave a Reply

in Touch

We are here to help you where we can with any requests you may have.

Phone: +91 8849198097
Address: Ahmedabad, Gujarat.