Key Takeaways:
- Tether, the stablecoin issuer, did partially back its stablecoin with Chinese stocks for a while, despite refusing to confirm it at the time.
- Tether owned securities issued by China Construction Bank Corp. and Agricultural Bank of China Ltd.
The cryptocurrency market has been subject to numerous regulatory challenges and controversies over the years. One of the recent developments that has raised concerns among investors is the exposure of Tether, the world’s largest stablecoin, to Chinese securities. In response to these concerns, Tether has taken proactive measures to ensure stability and transparency within its ecosystem.
According to documents disclosed by New York’s Attorney General (NY AG) on Friday, June 16, Bloomberg claims that USDT, the world’s largest stablecoin, was originally backed by assets issued by Chinese firms.
Tether, in particular, cited securities issued by China’s state-owned Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China as part of the collateral for its USDT stablecoin reserves.
Tether claims that they “do not condone this behaviour,” adding that their clients are their top priority. The stablecoin issuer also pointed out that the media outlets’ materials did not accurately portray the business as it currently stands. According to Tether, the information given to the media sites is sparse and older than two years.
According to the documents, Tether’s banking relationships were disclosed, revealing that the stablecoin issuer held accounts at Deltec Bank & Trust, Ansbacher (Bahamas) Limited, Capital Union Bank, and Far Eastern International Bank. In addition, Tether maintained reserve assets in funds at Bradbury Investment and Metis Global Partners.
Furthermore, Tether had reserves consisting of US dollars, Bitcoin held on Bitfinex (an affiliated cryptocurrency exchange), and reserves worth over $2 billion stored in gold.
Tether, the stablecoin issuer, has faced its fair share of controversies and allegations throughout its history. One such controversy emerged in March 2020, stemming from a Wall Street Journal report. The report alleged that Tether had utilized false documents and shell companies to gain access to the banking system.
According to the report, Tether’s funds were held by Crypto Capital Corp., described as a “shadow bank,” until it was closed down by authorities in 2018. Additionally, the report claimed that Tether and its sister company, Bitfinex, had opened several bank accounts for shell companies in Asia in October 2018.
