- It is now coming to light that Tether may actually have some real dollars, outside of the commercial paper, Treasuries, precious metals and cryptocurrencies that it uses to back USDT, in a small Bahamas bank called Capital Union.
- In an interview with the Financial Times earlier this month, Tether’s Chief Technology Officer Paolo Ardoino said that its most liquid reserves, cash deposits, were held at two banks in the Bahamas and it’s been said that Capital Union is one of those banks.
Cryptocurrency investors have had a rough month.
From the collapse of the algorithmic stablecoin TerraUSD and its sister token LUNA, to the run on the stalwart “backed” stablecoin Tether or USDT, it’s no wonder that cryptocurrency markets have been bathed in a sea of red.
In a crisis of confidence, the collapse of TerraUSD, raised uncomfortable questions for the world’s most widely used dollar-based stablecoin USDT, which has always been cagey about revealing its reserves.
At one point scrutiny of Tether saw it slip its peg to trade as low as US$0.95, although it’s since more or less recovered from that level.
Nevertheless, Tether holders are not sticking around to find out if the stablecoin is truly backed or not, with over US$10 billion redeemed so far, which Tether has argued proves its ample liquidity.
Launched in 2014, Tether’s USDT is ubiquitous in the cryptocurrency markets and is the most widely available stablecoin-crypto trading pair, as well as the base currency for almost all derivative products.
Registered in the British Virgin Islands, Tether is no stranger to controversy, having entered into a settlement with the New York Attorney General’s office over irregularities regarding its past transactions and allegedly covering up the fact that USDT may not always have been backed by reserves at all times.
While TerraUSD’s collapse wiped off around US$100 billion in market cap from cryptocurrencies across the board, a result of its contagion effect, a collapse of USDT would be systemic and could be crypto’s Lehman Brothers moment.
It is now coming to light that Tether may actually have some real dollars, outside of the commercial paper, Treasuries, precious metals and cryptocurrencies that it uses to back USDT, in a small Bahamas bank called Capital Union.
Tether has long struggled with establishing and maintaining banking relationships, at one point it was banking with JPMorgan Chase, before the bank unilaterally severed those ties.
For years, banks have generally been reticent to deal with cryptocurrency companies over concerns that the costs and risks far outweighed any benefits.
Banks that have opened their doors to cryptocurrency companies however have done well, riding up alongside the prices of the digital assets, including Silvergate Capital and Signature Bank.
In an interview with the Financial Times earlier this month, Tether’s Chief Technology Officer Paolo Ardoino said that its most liquid reserves, cash deposits, were held at two banks in the Bahamas and it’s been said that Capital Union is one of those banks.
Capital Union has declined to confirm that it indeed does hold any of Tether’s cash assets, but according to an annual report, the boutique bank was founded in 2013, roughly around the time that Tether was created, and had assets of about US$1 billion at the end of 2020.
