According to a report published in the Wall Street Journal (WSJ), even a 0.3 percent depreciation of reserve assets on Tether’s balance sheet could render Tether technically insolvent.
WSJ journalists Jean Eaglesham and Vicky Ge Huang released Aug. in the news It focused on the ambiguous nature of Tether’s USDT reserves, with the reserve audit expected since 2017.
Eaglesham and Huang said such a delicate balance could lead to market turmoil if Tether’s debt obligations exceed its assets.
“A 0.3 percent drop in the value of the assets could leave Tether technically insolvent — skeptics of the stablecoin warn that this development will undermine investor confidence and lead to increased foreclosure requests.”
Tether has $67.74 billion in assets and $67.54 billion in debt payable as of the time of publication, meaning the difference between the two parties is only $191 million.
Tether CTO Paolo Ardoino downplayed this narrow gap, stating that “a significant increase in capital is expected in the next few months”.
“I don’t think we are the systemic risk in the crypto system.”
Ardoino explained that the company has no problems with converting customer funds into cash, and they have cashed out $7 billion worth of USDT in the last 24 hours when the crypto market crashed.
According to Tether’s website, 79.62 percent of its reserves are currently backed by cash, cash equivalents, financing bills and other short-term deposits. The remaining 8.36 percent is made up of other investments such as unspecified digital tokens, 6.77 percent secured loans and 5.25 percent corporate bonds, funds and precious metals.
Ardoino did not disclose the content of the remaining $5.6 billion in Tether’s reserves.
Tether’s reserves have been in the spotlight due to past issues with regulators over the stablecoin’s market dominance and misrepresentation of its reserves.
Tether is required to publish a detailed report of its cash and non-cash reserves each quarter, as per the $18.5 million agreement with the New York Attorney General’s Office in February 2021.
In response to the WSJ, Ardonio announced that the company will soon publish monthly reports to increase transparency.