Tether is Setting a New Standard for Transparency — And Responding to Criticism That is Untethered From Facts

Stuart Hoegner
6 min readMay 17, 2021

“You have to be willing to be misunderstood if you’re going to innovate.” — Jeff Bezos

Innovators in the crypto community have worked tirelessly to prove ourselves, our ideas, and our technologies. Creations are often met with equal amounts of enthusiasm and skepticism. Many see wonderful possibilities for progress and growth in crypto. Others see threats to the established order. Much like the automobile, the personal computer, and the internet, what first seemed crazy is now normal.

Healthy skepticism and vigorous debate are the hallmarks of credible change. But there is a difference between expressing doubts and sowing misinformation built on lies, distorted facts, and willful ignorance of objective evidence.

Cryptocurrency is a growing movement that has become a global financial system. Crypto’s detractors, despite a campaign of misinformation, have not been able to slow this growth because the market sees the opportunity and the value they refuse to consider. In less than 15 years, cryptocurrencies have moved from an idea to a reality and, more recently, to a force.

As a member of this community, Tether issues a stablecoin. Stablecoins peg a token’s value to an underlying asset, which allows a store of fiat value on a blockchain, for example. No one is required to use Tether’s stablecoin. Unlike fiat money, there are no laws compelling people to hold or use tether tokens. People hold them because they are useful, stable, liquid, and trusted. We provide options and choice in a global financial system that has resisted both. We believe in providing information and understanding for our customers to make informed choices, and then we let the market speak for itself. And spoken it has.

Part of our commitment to transparency and facts means it is important that we correct the record once and for all about Tether’s backing, our cooperation with the New York Attorney General’s Office, and our transparency efforts.

Our attestations prove once and for all that Tether is fully backed

This year, Tether began releasing periodic assurance opinions conducted by independent accountant Moore Cayman. These attestations are the same type that other major stablecoin participants have made public. The assurance opinions contain express attestations from an independent and professional third party that:

  1. Tether’s assets exceed all of its consolidated liabilities; and,
  2. Tether’s reserves held for issued tethers exceed the amount required to redeem those tethers.

Moore Cayman has followed established and recognized procedures for an assurance engagement, in accordance with the International Auditing and Assurance Standards Board (IAASB) International Standard on Assurance Engagements (ISAE 3000 (Revised)). This includes independent examination of, among other things, extensive bank statements, blockchain data, gold counts, contracts, and financial and other working papers obtained from third parties.

Moore Cayman’s practice in the Cayman Islands is focused on providing assurance services to crypto funds and virtual asset service providers. As auditors to 80 cryptocurrency-focused investment funds, they are a leader in this field. Moore Cayman is also a part of Moore Global, among the largest accounting groups in the world. Some of the biggest names in the crypto ecosystem are clients of Moore Global independent firms.

Our settlement with the New York Attorney General’s office should be seen as a measure of our desire to put the matter behind us

The settlement with the New York Attorney General’s Office is far more notable for what was not found than for what was found. Tether explicitly admitted no wrongdoing. And, after an extensive investigation for more than two years and reviewing more than 1M pages of documents provided by Tether and Bitfinex, the New York Attorney General’s Office made no negative findings whatsoever that tethers were not fully backed, nor were ever issued without backing, or for the purpose of manipulating crypto markets. All the New York Attorney General’s Office determined — which, again, we did not admit — was that certain disclosures from long ago could have been made sooner. The Moore Cayman attestations and other recent disclosures show our commitment to transparency is greater than ever, and go well beyond anything required in the settlement with the New York Attorney General.

Our reserves breakdown offers suitable transparency into Tether’s reserves

Instead of acknowledging the positive steps taken by Tether, a small number of our detractors are trying to move the goalposts once more. Only last week, the disingenuousness of this group was again on full display. Unlike most that welcomed our further transparency as to how Tether’s reserves are deployed, this group rededicated itself to spreading patently false and misleading misinformation and outlandish conspiracy theories.

Despite these empty attacks, the market has once again clearly spoken: in the 45 days between our assurance opinion for March 31st to May 15th, Tether’s market capitalization has grown by $17B to more than $58B, representing almost 30% of the tethers now issued.

Tether’s reserves show that cash, cash equivalents, and other short-term deposits and commercial paper make up 75% of a highly conservative and liquid reserve allocation. The amount of cash in that category is far from the only part of the story, as anyone with experience in the financial sector would know, but our opponents insinuate that only cash is liquid and available to meet redemptions. As to treasury bills, they are a small part of the overall picture. Short-term t-bills have interest rates at or near zero. Mandating a cash and t-bills only approach to reserves is a recipe for an undiversified and unsustainable business.

Commercial paper makes up almost two thirds of the cash and cash equivalents and other short-term deposits and commercial paper. Commercial paper is short-term debt issued by corporations. The vast majority of the commercial paper we hold is in A-2 and above rated issuers. In order to ensure it has diversified exposure, Tether imposes limits on individual issuers and on regional exposure. These are in line with Tether’s investment policy and industry practice. The commercial paper we hold is purchased through recognized issuance programmes. Accordingly, wild speculation that this includes commercial paper issued by crypto exchanges is absolutely false; no such commercial paper, if it exists, is held by Tether. No commercial paper purchased by Tether is issued by any affiliated entities.

Or consider fiduciary deposits. These are inter-bank placements; a deposit is placed by a customer with one bank through another separate agent bank. Here again, a clear majority of our deposits are in A-2 and above rated issuers, and no fiduciary deposits held by Tether are with Tether affiliates. Or look at corporate bonds which, along with precious metals and funds, constitutes almost 10% of the reserves. The bond portfolio is invested in a diversified group of corporate issuers, the lion’s share of which are investment grade as rated by S&P, Moody’s, or Fitch. Once again, no corporate bonds held in the reserves are issued by any Tether affiliates.

These investment categories and concepts are not new, and they reflect time-honored strategies consistent with best practices and are part of a conservative approach to managing the reserve portfolio.

Words and actions

Ideas that change the world are frightening to those who benefit from the status quo. Fear — of change, for their positions — is motivating some to attack and try to mislead the crypto community. Rather than live in a stolid world where we ask how we can keep things the same, we are pushing to think differently and ask how we can do better and continue to make progress.

We will not change the minds of those who refuse to open them. But that is not our goal. But we will meet fiction with facts, as we strive to set a new industry standard for transparency.

We believe choice is a right, and we will fight to offer financial options to those who seek them. Just because a small group has decided not to embrace our offering does not mean they should make that decision for all, or use misinformation to try to mislead others. Our goal is the choice and autonomy they seek to deny, and the harder they fight, the more firm our resolve in both words and actions.

Our customers, stakeholders, and the crypto community have shown they support this new way of thinking. The world needs and deserves more new ideas and innovation now more than ever, and we are proud to be a small part of the change that is needed and happening.

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