In the Wall Street Journal (WSJ), Tather’s balance stated that even a 0.3% drop in the value of its reserve assets could “render Tether technically insolvent.”
WSJ journalists Jean Eaglesham and Vicky Ge Huang focused in an August 27 report, on the cloudy nature of Tether’s USDT reserves and its long-awaited audit that has been in the works since 2017.
Eaglesham and Huang recommended that such a “thin cushion of equity” could cause turmoil in the market, if Tether’s liabilities were to outweigh its assets.
At present, Tether has $67.74 billion worth of assets and $67.54 billion worth of liabilities, marking a difference of just $191 million as per Tether’s website.
Tether CTO Paolo Ardoino has, though, played down the strictness of Tether’s tight margins, telling the publication that he expects its capital to “grow significantly over the next few months,” adding:
“I don’t think we are the systemic risk in [the crypto] system.”
Ardoino noted that the company had no problems repaying customers, and during the recent crypto market crash, it was able to recover $7 billion in just 24 hours.
Tether’s website states that 79.62% of its reserves are currently backed by cash, cash equivalents, other short-term deposits, and commercial paper. Other investments worth the remaining 8.36% include unspecified digital tokens, 6.77% secured loans, and 5.25% corporate bonds, funds, and precious metals.
Ardoino did not comment on what Tether’s roughly $5.6 billion worth of other investments are made of, according to the report.
The nature of Tether’s assets has been a long-running and key narrative in the crypto space given the market supremacy of its stablecoin and the firm’s dealings with regulators over alleged misrepresentations of Tether’s backing in the past.
In February 2021, as part of the $ 18.5 million settlement with the Office of the New York Attorney General, Tether was legally required to publish quarterly reports breaking down the precise composition of its cash and non-cash reserves.
Ardonio also told the WSJ that the upcoming move to monthly reports is part of the company’s efforts to provide greater transparency.
Earlier this month, Tether signed a contract with a major accounting firm BDO Italia to support its reporting transparency, performing independent certifications. However, a full audit of the company has yet to be conducted to delve deeper into Tether’s finances and provide the full scope of its operations.
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