To end speculations over the solvency of Tether and mostly whether its dollar-pegged stablecoin is actually backed by fiat reserves, it released a surprise “Transparency Update” that implies it has enough funds in the bank to cover the $2.6 billion of USDT in circulation. A growing chorus of critics has joined vocal Tether critic Bitfinex to demand full transparency from Tether, a part-owned by Bitfinex. Tether was now obliged for the second time in six months, to produce a legal report into its financial standing.
The report was produced by a former FBI director’s law firm. The report carries weight from a legal perspective but fails to provide cast-iron guarantees that Tether is not operating a fractional reserve. The true state of Tether’s finances will remain a speculation until there is an audit on the company’s accounts done by professionals.
The transparency update begins thus: “As many are aware, Tether and related parties have been the subject of scrutiny over the course of the past several months.” “We have spent our time largely disregarding these allegations, and instead letting our efforts, and the continued faith of our community of users speak for themselves.”
Sporkin & Sullivan is the legal firm that was tasked with taking a snapshot of Tether’s bank balance. They did so on June 1, after they confirmed that there were enough funds to cover all USDT in circulation on a 1:1 basis.
“Recent reports have opened our eyes to the fundamental lack of understanding surrounding Tether, the issuance, and redemption mechanisms, and the compliance procedures that we have built,” continues the Transparency Update document. “To mitigate this, we will be taking additional steps aimed at opening up Tether to the general public and clearing away any uncertainty that may exist.”
The only answer awaited by cryptocurrency holders is for Tether to commission an independent audit. After the audit is done, there won’t be any doubt left and faith in Tether will be restored.