Tether, one of the largest stablecoin providers, has released a detailed rebuttal to address mounting concerns regarding the inclusion of securities issued by Chinese companies in the reserves of USDT.
Where Did The Accusations Come From?
For years, rumours surrounding Tether’s exposure to Chinese securities have circulated within the cryptocurrency community. These allegations can be traced back to an investigation initiated by Letitia James, the Attorney General of New York, in April 2019. The investigation primarily focused on determining whether the popular cryptocurrency exchange BitFinex had concealed substantial losses, estimated to be around $850 million, from its investors.
Among the alleged losses, a significant portion, roughly $700 million, was purportedly associated with Tether's reserves, which James referred to as BitFinex's "slush fund."
The situation reached a critical point in 2021 when Bloomberg published a research report that shed light on Tether's reserves supposedly comprising billions of dollars in short-term loans to Chinese companies, alongside a substantial loan to the now-collapsed crypto lender, Celsius Network.
However, in February 2021, Tether reached a settlement with the New York Attorney General's office, leading to further investigations into potential money laundering activities and subsequent ramifications for both Tether and BitFinex. As part of the settlement agreement, both companies were prohibited from engaging in business operations within the state of New York.
Tether’s Rebuttal to Recent Reports
In a bid to clarify misconceptions on the recent reports and to address the reports published by mainstream media outlets, such as Bloomberg, Tether took to Twitter to provide a more accurate understanding of its position on this issue.
Earlier on Friday, June 16, Several media reports including from Bloomberg, highlighted that Tether, a leading stablecoin provider, had once held securities issued by Chinese state-owned companies. These reports referenced documents released by the New York Attorney General (NYAG) and pointed out that USDT was allegedly backed by securities from entities like the Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China. The disclosure of these details generated significant scrutiny and raised concerns among various stakeholders in the cryptocurrency industry and beyond.
On the same day, Tether issued a prompt official response to the reports on Twitter, addressing the concern over its reserves, and stated:
“Ultimately Bloomberg, CoinDesk or any other media outlet’s decision to present this information to its readers was likely done in haste with little attention to current events or facts.” – Tether
Tether firmly stated its disapproval, stating that they “do not condone this behavior,” and emphasized its commitment to prioritizing the well-being of its customers. The stablecoin issuer made it clear that the materials obtained by the media outlets do not accurately the current standing of the company and further pointed out that the data shared with the media platforms is limited and dates back more than two years.
Furthermore, Tether provided further clarification regarding its engagement with Chinese commercial papers, emphasizing that its exposure was highly liquid and all the issuers involved were reputable and stable. The company also highlighted that these commercial papers were utilized by prominent investment managers worldwide. Tether further emphasized that the Chinese banking-related commercial paper in question had a rating of A1 or higher, indicating their robust financial standing.
Regarding its commercial paper holdings, Tether stated that it had completely eliminated its exposure to such assets in the previous year. The stablecoin issuer affirmed that it did not incur any financial losses related to any commercial paper, including those issued by Chinese firms.