The Tether transparency issue has again come to light amid the “bank run” scenario caused by the collapse of the algorithmic stablecoin TerraUSD (UST).
To keep Tether (USDT) pegged to the US dollar, the firm behind the token backs USDT with assets. These include cash, bonds, and Treasury bills. With it is the goal of ensuring that at least $1 in assets backs each token.
Tether transparency: cash reserves in question
According to the most recent reserves report, the company had at least $78.6 billion in total assets. And around $4 billion or 5% of which was cash.
Despite the “bank run” scenario generated by the collapse of the algorithmic stablecoin TerraUSD (UST), which had investors fleeing not only stablecoins but the whole crypto market for fear of collapse, the firm seemed to be able to keep its cash reserves.
Tether currently holds 6.36% of its assets in cash. It amounts to nearly $4.8 billion assuming Tether’s reserves closely reflect the USDT market valuation. This is according to a separate transparency report updated daily.
Market turbulence
Market panic on Thursday prompted USDT/USD to trade below $0.99 on major exchanges, prompting Tether to publish a statement at the time claiming that all redemptions to $1 would be honored.
Tether’s Paolo Ardoino said in a Twitter spaces chat that the majority of the company’s reserves are in U.S. Treasuries. And that it has cut its exposure to commercial paper over the last six months.
Tether has come under fire for being secretive about the assets in its reserve, and it only revealed its first reserve breakdown in May 2021. The published reports are still imprecise about the specific assets in which the company invests.
This mystery, combined with the recent brief de-pegging, prompted some investors to exchange their Tether for another popular U.S. dollar stablecoin, USD Coin (USDC), on the premise that USDC was audited and already completely backed by cash and U.S. Treasuries.