According to a Wall Street Journal (WSJ) article, Tether’s (USDT) balance sheet is in such bad shape that merely a 0.3% loss in the value of its reserve assets might “render Tether technically insolvent.”
WSJ journalists Jean Eaglesham and Vicky Ge Huang focused on the hazy nature of USDT reserves in a Saturday piece, as well as the long-awaited audit that has been in the works since 2017.
Eaglesham and Huang stated that a “thin cushion of equity” may trigger market havoc if Tether’s obligations exceeded its assets:
“A 0.3% fall in assets could render Tether technically insolvent — a development that skeptics warn could reduce investor confidence and spur an increase in redemptions.”
According to Tether’s website, at the time of writing, USDT has $67.74 billion in assets and $67.54 billion in liabilities, a difference of only $191 million.
Tether’s chief technology officer Paolo Ardoino, on the other hand, has downplayed the severity of USDT’s thin margins, telling the outlet that he expects the company’s capital to “grow significantly over the next few months,” adding:
“I don’t think we are the systemic risk in the crypto system.”
Ardoino also stated that the company has had no trouble redeeming customer cash and that it was able to redeem $7 billion in under 24 hours after a recent crypto market drop.
Tether is legally compelled to publish quarterly disclosures detailing the particular composition of its cash and non-cash reserves as part of a $18.5 million settlement with the Office of the New York Attorney General in February 2021.
Ardonio also told the WSJ that the company will soon transition to monthly reporting as part of its effort to increase openness.
Tether hired large accounting firm BDO Italia earlier this month to help it meet its reporting transparency goals by completing independent attestations. However, there is yet to be a complete audit of the company, which would go further into Tether’s financials and provide the full breadth of its operations.
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