AssetsAug 30, 2022

Tether (USDT) threatened with bankruptcy

Wall Street Journal experts say the most popular stablecoin has a "thin cushion of capital".

Tether (USDT), which is the largest "stable" cryptocurrency in terms of overall market capitalization, is at risk of "technical insolvency" if its reserve assets were only to decline by 0.3%. In the report published last Saturday, the team of journalists from the WSJ emphasized that the cryptocurrency community is waiting for an audit of this project from 2017, which should give a lot to think about.

Tether may soon become insolvent

The recent spectacular bankruptcy of the South Korean stablecoin belonging to the Terra project has made investors perceive similar virtual currencies much more cautiously since this happened. A group of experts from a popular New York newspaper decided to investigate this particular project with great care. It is worth emphasizing that this stablecoin ranks first among the largest stable cryptocurrencies.

According to a report released by the WSJ on Saturday, USDT has a thin capital cushion. The authors of this report - J Jean Eaglesham and Vicky Ge Huang conclude that a decrease in the value of its reserve assets by only 0.3% would lead to the insolvency of the entire project.

If Tether's liabilities outweigh his assets, it could cause massive chaos in the crypto market. This, in turn, would certainly further reduce the already low level of investor confidence in this type of assets. Journalists recalled, among others that the community, for unknown reasons, has still not received any Tether audit data since 2017.

Currently, the data available on the official USDT website shows that its assets are worth over USD 67.74 billion and its liabilities to creditors currently amount to USD 67.54 billion. This in turn means a cushion of just $ 190.9 million. Which is an extremely unsatisfactory result.

USDT representatives see no risk

Tether's chief technology officer Paolo Ardoino says he is not concerned about the current situation and that Tether is in good shape. He admitted that he did not think this stablecoin would pose any risk to the cryptocurrency market. He also added to his statement that capital growth is expected in the coming months. However, he did not explain why he thought so.

The USDT representative recalled that Tether had already proven its credibility in the past because when the company faced a significant collapse in the virtual currency market, it had no problems recovering customer funds and redeeming $ 7 billion in just one day.

The data from Tether's website also shows that almost 80% of its reserves are cash, cash equivalents, short-term deposits and commercial paper. Tether's portfolio also includes other assets. About 8.36% are investments, 6.77% are secured loans, and 5.25% are corporate bonds, funds and precious metals.

It should be recalled that this project was legally obliged in 2021 to publish quarterly reports presenting the detailed composition of its reserves. Paolo Ardoino admitted that the company also plans to start publishing monthly reports soon to ensure greater transparency. For this reason, Tether has established cooperation with the world-renowned crypto auditing and accounting company BDO Italia.