Chinese Securities Once Backed the World’s Largest Stablecoin USDT: Bloomberg

Bloomberg reported that New York’s Attorney General has released documents revealing that Tether Holdings Ltd., the issuer of the world’s largest stablecoin, USDT, once held securities issued by Chinese companies as part of its reserves. The disclosure comes after years of speculation and scrutiny surrounding the assets backing Tether’s stablecoin.

New York’s Attorney General shed light on Tether’s holdings

In October 2021, a Bloomberg investigation uncovered evidence suggesting that Tether’s reserves included billions of dollars in short-term loans to Chinese companies and a substantial loan to the crypto platform Celsius Network. At the time, Tether denied any exposure to the debt of the crisis-hit China Evergrande Group but remained silent on its holdings of other Chinese securities.

According to the disclosed documents, Tether had holdings of securities issued by prominent state-owned Chinese companies, such as Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., and Agricultural Bank of China Ltd. The maturity dates of these securities range from 2020 to 2021. Additionally, Tether’s holdings included securities issued by companies like Deutsche Bank AG, Barclays Bank Plc, and ArcelorMittal SA.

Tether’s banking relationships were outlined in the documents, showing accounts held at Deltec Bank & Trust, Ansbacher (Bahamas) Limited, Capital Union Bank, and Far Eastern International Bank. The stablecoin issuer also held reserve assets in funds at Bradbury Investment and Metis Global Partners. Additionally, Tether had reserves in US dollars, Bitcoin held on Bitfinex (an affiliated crypto exchange), and over $2 billion worth of reserves in gold storage.

Why this is Concerning?

The documents also revealed Tether’s significant lending program, which involved issuing loans in USDT to third parties. As of March 31, 2021, the program reached $5.1 billion, with collateral in the form of digital assets or securities.

The quality of assets supporting USDT has long been a topic of concern due to the stablecoin’s crucial role in cryptocurrency markets. Traders rely on USDT, which has a circulation of approximately $83.5 billion, for liquidity and stability.

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