The article titled “Tether Is on the Brink of Insolvency, Balance Sheet in a Pathetic Condition: Wall Street Journal” was first published on Coinpedia – Fintech & Cryptocurreny News Media| Crypto Guide.
Tether made headlines two weeks ago because of the increase in its market capitalization and the fact that it was able to reverse a downward trend that had been occurring for the previous three months.
According to a recent report published in the Wall Street Journal (WSJ), Tether’s balance sheet is in such a precarious condition that even a 0.3% decrease in the value of its reserve assets might “make Tether technically bankrupt.”
In their article published on August 27, 2018, journalists for the Wall Street Journal named Jean Eaglesham and Vicky Ge Huang stressed the fluctuating nature of Tether’s USDT reserves as well as its long-awaited audit that has been in the works since 2017.
The journalists hypothesized that if Tether’s liabilities were to outnumber its assets, then the company’s “thin cushion of equity” could be responsible for creating havoc in the market.
As of right now, the website for Tether reveals that the company has assets valued at $67.74 billion and liabilities valued at $67.54 billion, revealing a difference of only $191 million between the two amounts.
The Chief Technical Officer of Tether Has Spoken Out
Paolo Ardoino, CTO of Tether, played down the significance of the company’s extremely slim profit margins. He stated in an interview with the journal that he anticipates “substantial growth” in the company’s capital “over the next few months.” During the most recent crisis in the cryptocurrency market, Ardoino notified the public that the company was able to redeem $7 billion in just 24 hours. This demonstrates that the company has not experienced any difficulties in redeeming customer assets.
According to the website for Tether, the cryptocurrency’s reserves are now supported by cash, cash equivalents, other short-term deposits, and commercial paper to the tune of 79.62%. The remaining 8.36% consists of alternative investments such as unnamed digital tokens, 6.77% is invested in secured loans, and the remaining 5.25% is distributed among corporate bonds, funds, and precious metals.
According to the report, Ardoino declined to comment on the nature of Tether’s other investments, which are estimated to be worth $5.6 billion. Because of the market dominance of its stablecoin and the company’s dealings with regulators over alleged misrepresentations of Tether’s backing in the past, the nature of Tether’s reserves has been a lingering and major narrative in the cryptocurrency space. This is due to the fact that the nature of Tether’s reserves has been a major narrative in the crypto space.
Tether was legally required to release its quarterly reports to the public beginning in February 2021 as part of a settlement with the Office of the New York Attorney General in the amount of $18.5 million. These reports were to include a breakdown of the specific composition of Tether’s cash and non-cash reserves.
According to WSJ’s report, Ardonio also stated that Tether will strive toward “imparting greater transparency,” and as a result, the company will shortly convert to monthly updates.
In the same vein, earlier this month, Tether announced that it has joined forces with the well-known accounting firm BDO Italia to help it achieve its reporting transparency goals through the execution of independent audits.
Notably, a comprehensive audit of the company still needs to be carried out so that additional research can be done on Tether’s finances and the company’s operations may be described in their entirety. “Tether requires an audit that’s comparable to a corporate colonoscopy,” said John Reed Stark, who formerly served as the chief of internet enforcement at the Securities and Exchange Commission. “This audit needs to tell investors everything there is to know about what’s in their reserves.”
Tether Witnesses A Surge
Since the United States Treasury Department issued penalties on cryptocurrency mixer Tornado Cash on August 16, the market capitalization of Tether (USDT) tokens has grown by roughly $2 billion. This increase occurred around the same time.
Following the Tornado Cash sanctions, one user on Twitter hypothesized that users had converted approximately $1.6 billion worth of USDC to USDT.
On Twitter at the time, Tether’s Chief Technology Officer, Paolo Ardoino, made some lighthearted comments regarding the “turning” of USDC to USDT.