Tether commits to ‘Big Four’ audit; Circle’s share price falls 20%

It’s a little early for an April Fool’s joke, but hell does appear to have frozen over as stablecoin-issuer Tether claims it’s made a deal to conduct the first official third-party audit of its fiat reserves.

On Tuesday, USDT-issuer Tether announced that it had “entered a formal engagement with a Big Four accounting firm to complete its first full independent financial statement audit.” Not sparing the hype-hammer, Tether claimed the news marked “a defining moment not only for Tether, but for the evolution of modern finance itself.”

There are a few caveats to this evolutionary breakthrough, namely, the fact that Tether didn’t disclose which one of the ‘Big Four’ firms—Deloitte, Ernst & Young (EY), KPMG, and PricewaterhouseCoopers (PwC)—it had gotten engaged to. However, Deloitte recently performed the first ‘attestation’ of Tether’s new U.S.-facing stablecoin (USAT)—which has a market cap of under $28 million, a tiny fraction of the over $184 billion in circulating USDT—but whether that means anything remains unknown.

Tether also didn’t offer any timeline for when this Darwinian dissection will be issued. We’re still around two months away from when Tether would normally issue the next ‘attestation’ of its fiat reserves. The most recent attestation was performed, as always, by an Italian offshoot of professional service firm BDO.

These attestations are based on a single-day snapshot of Tether’s assets, with BDO Italia offering no assurances regarding what those assets consisted of the day before or the day after (and Tether’s previous in-out behavior offers scant assurance that all these numbers would resemble each other).

Tether’s ‘concepts of a plan’ to conduct an audit are the stuff of legend. It’s been nearly five years since Tether execs claimed an audit was “months, not years” away. That vow itself was four years overdue, following Tether’s sacking of its previous auditor (Friedman LLP) after it dared to undertake “excruciatingly detailed procedures” for (checks notes) a financial audit of a multi-billion-dollar company.

Tether moved its HQ to El Salvador in January 2025, so will Tether’s new auditor turn out to be an El Salvador-based offshoot of one of the Big Four firms? Will Tether’s new accounting partner turn out to be some post office box in a San Salvador strip mall registered to Quatro Grande Contabilidad Compañía?

Shortly after putting down its El Salvador roots, Tether claimed to be “engaging with a Big Four accounting firm” regarding an audit. Around the same time, Tether hired a new CFO, Simon McWilliams, to further its auditor-engaging ambitions. McWilliams said Tuesday that the unspecified audit firm was “selected through a competitive process” and offered the somewhat odd assurance that “the audit will be delivered.”

On Tuesday, Tether CEO Paolo Ardoino claimed “Tether’s mission has always been to build trust through action, not promises,” a philosophy that dovetails nicely with Tether’s years of broken audit promises.

Ardoino added that the upcoming audit “represents years of work to strengthen our systems so that Tether can meet the highest standards applied in global finance … this audit is not just a compliance exercise; it is about accountability, resilience, and confidence in the infrastructure they depend on.”

Confidence, you say… Bloomberg reported that Tether’s pursuit of an audit is related to its plans to raise up to $20 billion at a valuation of $500 billion. These plans appeared to have hit a wall last month, reportedly due to prospective investors demanding greater financial transparency than the ‘trust me, bro’ mantra Tether has relied on to date.

Meanwhile, some possible collateral damage from Tether’s announcement was a share price plunge for Circle (NASDAQ: CRCL), the issuer of the next-largest stablecoin (USDC). After opening Tuesday’s trading at $126.35, Circle’s shares lost more than one-fifth of their value within the first hour, at one point dipping as low as $98.31 before closing Tuesday at $101.17 (-20.1%).

While investors might fear that U.S. digital asset market structure legislation could negatively impact USDC’s status as a ‘rewards’ generating tool, Circle investors may also fear that a Tether audit could allow USDT to play a greater role in America’s regulated stablecoin market, where USDC currently rules the roost.

Tether previously claimed it would focus its U.S. efforts on USAT, reserving USDT for international use, particularly in emerging markets where confidence in local currencies is low. But with friends in high places—who may or may not owe them favors—who’s to say what exceptions might be made.

Lutnick, loans and liabilities

We can’t help but notice that Tether’s newfound commitment to transparency came hot on the heels of a concerning profile of its links to Wall Street firm Cantor Fitzgerald (NASDAQ: ZCFITX) and its founder, U.S. Secretary of Commerce Howard Lutnick.

After Lutnick joined the Trump administration last year, he sold his Cantor stake to trusts that benefited his children. On March 18, Bloomberg reported that one of these trusts, Dynasty Trust A, had borrowed money from Tether. The size of this loan is unknown, as is whether the borrowed funds were used to finance the sale of Lutnick’s multi-billion-dollar Cantor holdings.

Tether’s billions of dollars’ worth of ‘secured loans’ to parties unknown began drawing greater scrutiny several years ago, leading Tether to publicly vow to purge these non-traditional assets from its balance sheet.

But these loans soared from $4.8 billion at the end of 2024 to $17 billion just 12 months later. Also, Tether previously removed the phrase stating that none of its loans were made to “affiliated entities” after switching the company performing its quarterly attestations.

Bloomberg quoted a law professor saying that if Tether’s loan to the Lutnick family trust helped Lutnick complete the divestment of his assets, “it’s yet another favor his family owes Tether. And yet another reason for concern that Howard Lutnick may use his government power to benefit Tether, and his children, rather than the public.”

Cantor offered Tether a lifeline in 2021 by agreeing to take custody of Tether’s vast stock of U.S. Treasury bills (allegedly over $122 billion worth at the end of 2025). Lutnick has publicly vouched for the existence of Tether’s T-bills, although he was less emphatic on this subject when queried by Congress last year, saying only that he believed “my statements were accurate when made.”

Lutnick also confirmed that Cantor “owns a convertible bond with Tether” that’s believed to be valued at ~$600 million, giving Cantor a 5% stake in Tether. The value of this stake has soared in tandem with USDT’s market cap, with Bloomberg estimating its value at $25 billion if Tether’s grandiose fundraising plans ever come to fruition.

Bloomberg noted that Lutnick and members of his Commerce team contributed to the report issued last year by the White House’s Working Group on Digital Asset Markets that recommended the government “promote the development and growth” of stablecoins.

Both Cantor and Tether were among the entities lobbying hard for last summer’s passage of the stablecoin-focused GENIUS Act. Tether’s Ardoino was among the crypto execs personally invited to the White House to witness Trump signing GENIUS into law.

Ardoino has since been revealed as one of the ‘SUPERSTAR’ speakers at the Conference & Gala Luncheon that the issuers of the $TRUMP memecoin are holding at Trump’s Mar-a-Lago resort in Florida on April 25. Other confirmed speakers include crypto-friendly investors Tim Draper and Cathie Wood.

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Circle lobbies EU on stablecoin rules

On March 20, Circle submitted feedback to the European Commission on the Market Integration Package (MIP), legislation aimed at reducing barriers to financial services across the EU.

The MIP includes proposed upgrades to the EU’s distributed ledger technology (DLT) Pilot Regime, including a single regulator for crypto asset service providers (CASPs), allowing Central Securities Depositaries (CSD) rules to permit delivering CSD services via blockchain tech, and settlement finality rules.

Circle supports these reforms, but wants the EU to specify how it intends to transition from the Pilot Regime to “permanent sectoral legislation,” which Circle maintains is necessary to “justify long-term infrastructure investments.” Circle also wants to see a “more adaptive threshold mechanism” tied to “market uptake, liquidity conditions and supervisory assessments.”

Circle would like to see “all MiCA-compliant” e-money tokens (EMTs, aka stablecoins) recognized as cash-leg settlement in securities transactions. Future reforms should also consider whether “non-EU issued stablecoins subject to comparable standards in their home jurisdiction can be used for settlement in the EU.”

Circle suggests applying centralized EU-level supervision on “large, cross-border” CASPs that “present genuine systemic risk” to financial systems, leaving ‘non-systemic’ firms to be regulated by National Competent Authorities that are “often better positioned to provide agile oversight.” Circle also suggests ensuring firms aren’t subject to oversight from both “multiple national and Union-level bodies under different regimes.”

Mirroring efforts underway stateside, Circle would like to see greater effort put into incorporating stablecoins into EU collateral frameworks.

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Circle pleads with UK re 40% ‘unremunerated’ reserve requirements

On March 18, Circle’s chief strategy officer Dante Disparte gave testimony to the U.K. House of Lords’ Financial Services Regulation Committee, as part of the latter’s ongoing study of how best to regulate stablecoin use in the U.K.

Tether is equally uneager to participate in the U.K.’s upcoming regulated market due to the proposed requirement that major issuers hold 40% of their fiat reserves in cash in ‘unremunerated’ Bank of England (BoE) accounts. In a Lords’ meeting earlier this month, BoE deputy governor Sarah Breeden defended the 40% rule, noting that the original plan was 100% (the EU requires 60% to be held in cash in EU banks).

Asked about this 40% requirement, Disparte said it “ignore[s] the economic model of stablecoins” in that reserve assets are “the principal economic driver for a stablecoin issuer.” Unlike traditional payment processors that derive most of their revenue from transaction fees, stablecoin issuers are “cross-subsidizing” these transactions, making the ability to earn interest on fiat reserves paramount.

Asked by Lord Lilley if the 40% requirement was “a hindrance or a block,” Disparte said, “if the cash is held in an unremunerated manner, it will force the stablecoin issuer to seek revenue and fees in the same way that the oligopolies of the payments world do today.” If the 40% rule stands, “it will limit the speed with which we can see real competition to payment systems today.”

As for whether the U.K. should permit the payment of rewards/yield/interest to stablecoin holders, Disparte noted that the GENIUS Act prohibits issuers from paying yield, but market structure legislation currently before Congress is still working out what kind of rewards might be paid by third-party platforms like Circle’s former USDC partner, Coinbase (NASDAQ: COIN).

Disparte said Circle’s view is that third-party reward issuing “should be guarded, and it should be subject to a second set of rules” like America is trying to craft. But how financial innovations develop “both lending and credit products in secondary markets, yield in secondary markets, is an important part of the technological features of stablecoins that make them distinct from any other form of money or payment system in the world, which is programmability and composability.”

Asked how Circle benefits financially from its relationship to Coinbase, which relies on USDC for one-fifth of its revenue, Disparte said Circle’s business model “depends on shelf space, of circulation on those exchanges.” Circle pays exchanges like Coinbase and Binance serious sums for that shelf space, with Circle’s ‘distribution, transaction and other costs’ totaling $461 million in Q425, 52% higher than the final quarter of 2024.

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Resolv Labs stablecoin depegs after $80M minting exploit

The BoE’s deputy governor said the 40% requirement had been “sized with regard to actual experience of liquidity and same-day liquidity risks that the coins may face.” But bank runs aren’t the only potential crises facing stablecoin issuers—and their customers—as Resolv Labs discovered this week when its USR stablecoin abruptly lost its 1:1 peg with the U.S. dollar.

On March 21, Resolv announced that it had suffered “an exploit that allowed the attackers to mint 50mn of unbacked USR.” Resolv said its team had “paused all the protocol functions to prevent further malicious actions and is actively working on recovery.”

Within about six hours, USR’s fiat price slid to $0.20, and while it briefly recovered to around $0.54 the following day, it quickly sank again and currently sits around $0.27.

The attacker reportedly discovered a flaw in the minting function of USR’s smart contract that allowed them to print $50 million worth of the token after depositing just $100,000 worth of USDC. The attacker went on to mint an additional $30 million worth of USR before the protocol shut things down.

Initially, Resolv claimed that its “collateral pool remains fully intact. No underlying assets have been lost.” But the attacker swiftly transferred $50 million in USR to a number of decentralized finance (DeFi) protocols, swapped the USR for USDC and USDT, then converted many of those tokens to the Ethereum network’s native token ETH.

On March 23, Resolv issued an offer/threat to the attacker, saying they could retain 10% of the ~$25 million in converted ETH as a “settlement incentive” if they ceased “all further activity involving the exploited funds [and] transfer all remaining USR under your control.”

Resolv gave the attacker until Thursday, March 26, to comply; otherwise, the company said it would pursue legal action, as well as coordinate with various platforms to “restrict or freeze assets.” Resolv also offered a “white hat disclosure path” if the attacker can demonstrate that the exploit was “a good-faith security research effort.” So far, the attacker appears to be choosing violence.

On Monday, DeFi risk ratings analysts at Credora issued a report detailing how the attacker “exploited a privileged access key that was the single point of authentication for minting USR.” Credora flagged “high operational risk from a single privileged access key with substantial, unchecked minting authority that was compounded by the absence of on-chain safeguards that could have contained the damage even if the key were compromised.”

Crucially, Resolv’s smart contract had been the subject of multiple audits from reputable firms, none of which detected the vulnerability. Credora said this is “consistent with a broader pattern in DeFi security: access control logic flaws, particularly those involving single-key privilege escalation, have historically been difficult to surface through conventional audit processes.”

Credora noted that, while Resolv’s “underlying collateral pool remained largely intact, the conversion of synthetic liabilities into external assets impaired the system’s effective backing and triggered a run on liquidity before any formal loss allocation could occur.”

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