Tether, the multibillion dollar \u201cstablecoin\u201d that functions as the largest bank in the cryptocurrency economy, has paid out $10bn (\u00a38bn) in withdrawals since the crypto crash started in early May.<\/p>\n
The pace of withdrawals means the company is effectively dealing with a slow-motion bank run, as depositors seek to move their cash to more heavily regulated stablecoins.<\/p>\n
According to public blockchain records, $1bn of tether was redeemed \u2013 with the cryptocurrency handed back to the company and destroyed as part of the withdrawal process \u2013 just after midnight on Saturday.<\/p>\n
$1.5bn had already been redeemed the same way three days earlier. The total withdrawn is now, allowing for minor fluctuations in the stablecoin\u2019s peg, about one-eighth of the entire reserves of the company.<\/p>\n
The latest redemption comes after Tether published its latest audited accounts, which show that as of late March the company had backed user deposits with a mixture of US Treasury bills, bonds in other private companies, and about $5bn in miscellaneous \u201cother investments\u201d, including in other cryptocurrency enterprises.<\/p>\n
However, some have questioned whether the accounts are as reassuring for depositors as they appear. If the company\u2019s investments in cryptocurrency enterprises fell in value during the market crash, then it may have struggled to match customer deposits, one\u00a0fintech\u00a0analyst has argued.<\/p>\n
Like all stablecoins, the tether currency is supposed to always be worth a fixed amount \u2013 in this case, one US dollar. It achieves that, the company says, by maintaining a large reserve of stable assets: while retail investors can buy or sell tether on cryptocurrency exchanges, institutional investors can also simply pay money directly to Tether to receive newly minted tokens, and can return the tokens to the company in exchange for cash.<\/p>\n
Initially, Tether claimed its reserves were backed one to one with US dollars. However, after an investigation by the New York attorney general, the company admitted that was not always the case and said that its currency was simply backed by \u201cTether\u2019s reserves\u201d. As part of that settlement, it agreed to publish a quarterly statement that detailed what those reserves comprise.<\/p>\n
The latest statement, dated before the recent\u00a0crypto crash, shows Tether storing about $20bn of its cash in commercial paper, $7bn in money market funds and nearly $40bn in US Treasury bills, all of which are generally stable investments. Another $7bn, however, is stored in \u201ccorporate bonds, funds and precious metals\u201d, and \u201cother investments (including digital tokens)\u201d. As a portion of Tether\u2019s reserves, it is comparably small, but it opens the company up to the risk of breaking its promise to be \u201cfully backed\u201d should a large market fluctuation occur.<\/p>\n
That may already have happened,\u00a0said Patrick McKenzie, a fintech commentator who works for the payments company Stripe. According to Tether\u2019s company accounts, it has $162m more in reserves than the total outstanding tokens it has issued, McKenzie noted. But, to list just one public investment from the company, some of the digital tokens Tether holds are those of crypto investment platform Celsius.<\/p>\n
\u201cTether has invested\u00a0$62.8m\u00a0of the reserves into Celsius network \u2026 Celsius is in freefall due to the current market dislocation; the value of their native token is down by over 86%,\u201d said McKenzie, adding: \u201cClearly, that investment has suffered more than $20m in impairment. Impairment of 1% of one line item on their balance sheet ate more than 10% of their equity.\u201d<\/p>\n
In a statement, Paolo Ardoino, Tether\u2019s chief technology officer, said: \u201cTether has maintained its stability through multiple black swan events and highly volatile market conditions and, even in its darkest days, Tether has never once failed to honour a redemption request from any of its verified customers.<\/p>\n
\u201cThis latest attestation further highlights that tether is fully backed and that the composition of its reserves is strong, conservative, and liquid.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Tether, the multibillion dollar \u201cstablecoin\u201d that functions as the largest bank in the cryptocurrency economy, has paid out $10bn (\u00a38bn) in withdrawals since the crypto crash started in early May. The pace of withdrawals means the company is effectively dealing with a slow-motion bank run, as depositors seek to move their cash to more heavily […]<\/p>\n","protected":false},"author":8,"featured_media":22249,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_post_source_name":"","_post_source_url":"","footnotes":""},"categories":[61],"tags":[7358,6573,9297,7960,7331,10000,8193,8918,5806,11538,5195,9309,5196,8031,6700,10197,9343,10742,8126,4995,5612,990,11973,5911,8386,13334,7540,5807,8840,6675,6701,6348,8385,594],"class_list":["post-22248","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-bank","tag-black","tag-blockchain","tag-case","tag-cash","tag-conservative","tag-crash","tag-crypto","tag-cryptocurrency","tag-digital","tag-dollar","tag-dollars","tag-economy","tag-equity","tag-fintech","tag-investigation","tag-investment","tag-market","tag-match","tag-minor","tag-money","tag-new-york","tag-one","tag-patrick","tag-platform","tag-precious-metals","tag-reserves","tag-risk","tag-strong","tag-technology","tag-tether","tag-us","tag-verified","tag-who"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts\/22248","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/comments?post=22248"}],"version-history":[{"count":0,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts\/22248\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/media\/22249"}],"wp:attachment":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/media?parent=22248"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/categories?post=22248"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/tags?post=22248"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}