The audit report finally shows what backs USDT
Tether USDT has revealed how it backs the estimated $74 billion USDT currently in circulation. Tether released its consolidated reserves report, which confirms that the group’s consolidated assets, which amount to approximately $82.4 billion, exceed its consolidated liabilities.
This is good news for holders of USDT as there had been some mystery surrounding exactly how one of the leading and most utilized stablecoins backed itself. Primarily due to run-ins with the U.S. Securities & Exchange Commission (SEC), made worse by the high ratio of much less liquid commercial papers in the reserves as shown by Tether Holdings at the end of 2021.
Moreover, as UST crashed and burned these last two weeks, all eyes were on stablecoins to prove themselves. While the financial mechanics and assets backing other leading stablecoins USDC, BUSD, and DAI are well known, Tether remained in the shadows.
The big USDT reveal
Finally, on May 19, Tether released a ten-page consolidated reserves report conducted by independent accountants MHA Cayman. It shows the group’s assets as of March 31, 2022, as follows:
- Consolidated total assets are at least $82,424,821,101
- The group’s consolidated assets exceed its consolidated liabilities
- The group’s reserves against issued digital tokens exceed the amount required to redeem them
- Consolidated assets show a significant decrease in average maturity with a focus on shorter-term assets
As mentioned, the estimated circulating supply of USDT at writing is $74 billion, and here we see at least $82 billion in reserve. In a nutshell, if USDT goes belly up for whatever reason, Tether has the reserves to cover it.
While the previous week has been turbulent for some stablecoin projects with much lesser adoption and liquidity, it’s been an excellent example of Tether’s strength and resilience. It deviated from its dollar peg by only $0.01 on a few occasions over the last two weeks, while BUSD, for example, saw a $0.05 deviation at one point. Importantly, this was a temporary situation for BUSD and at writing is back to $1.
The $1 question on everybody’s lips
Over the last few weeks, the rapid downfall of one of the biggest US dollar-pegged stablecoins, Terra USD, has placed a giant magnifying glass over an industry segment worth an estimated $162 billion. In the fallout of the UST debacle, other stablecoins started losing their respective pegs, calling for a broader review of the market and a deeper understanding of what stablecoins are and how they work.
Now Tether has finally revealed how it backs its USDT stablecoin, leading coins are looking more robust than ever. To learn more about the leading stablecoins and how they support themselves, we suggest you check this article out, and if you want to go deeper, you can learn more here.
The above does not constitute investment advice. The information given here is purely for informational purposes only. Please exercise due diligence and do your research. The writer holds positions in various cryptocurrencies, including BTC, ETH, and RADAR.