Documents reveal USDT was once backed by Chinese securities

Over the years, Tether (USDT) and other stablecoin issuers, have faced persistent scrutiny and criticism for their lack of transparency regarding the nature of assets backing their digital currencies. 

The absence of clear information regarding reserve holdings has raised concerns within the cryptocurrency community and regulatory bodies alike. Despite mounting allegations, Tether has consistently refuted these claims, insisting on the legitimacy of their operations.

On Friday, June 16, Bloomberg reports revealed that USDT, the world’s biggest stablecoin, was once backed by securities issued by Chinese companies, according to the documents published by New York’s Attorney General (NY AG).

Specifically, Tether listed securities issued by China’s state-owned Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China as part of backing its USDT stablecoin reserves.

For years, rumors about USDT’s exposure to Chinese securities had followed Tether. In 2021, Bloomberg published a research report that revealed Tether’s reserves reportedly included billions of dollars worth of short-term loans to China-based companies, in addition to a significant loan to the collapsed crypto lender Celsius Network. 

However, in February 2021, Tether came to a settlement with the NY AG’s office over accusations that it provided misleading information about its reserves and losses, handing over documents such as letters, bank accounts, reserve holdings, and wallet addresses through the law firm Steptoe. 

The documents, which offer insights into Tether’s reserves as of March 31, 2021, were held by the NY AG, which also initiated procedures to investigate potential money laundering. 

On Friday, the NY AG made the documents public, which show that at one point, the stablecoin issuer had its reserves backed by securities issued by state-owned China-based companies such as Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., and Agricultural Bank of China Ltd. 

The latest reserves report

On May 10, Tether released its latest attestation report for Q1 2021, which showed the USDT issuer’s reserves were worth $81.8 billion at the end of the quarter, up from $14.8 billion from the earlier period. 

In Q1, the company’s reserves consisted of $53 billion in US Treasuries, $1.5 billion in Bitcoin, and $5.3 billion in loans which the report described as “over-collateralized.”