Despite the accountant’s permission, the portfolio of assets underlying Tether remains inadequate by institutional standards, according to a Wall Street Journal investigation.
According to the audit conducted by Moore Cayman of Cayman Island, Tether‘s consolidated total assets of $62.7 billion exceed its consolidated total liabilities of $62.6 billion. Tether purchased approximately $14 million in treasury notes in April, May, and June. By issuing US government paper for about a quarter of the assets underpinning the currency, it reduced its cash position by approximately $2.5 billion.
The research acknowledges that these would be advantageous, as they are easier to sell in the event of a cryptocurrency rush. Alternatively, it might contribute cash to bolster the price by purchasing Tether on the market if it fell in value.
However, the research is significantly more scathing of the asset portfolio’s $2 billion in “other investments.” These include additional cryptocurrencies, and the study cautions that there is no indication of their ease of sale. Additionally, it highlighted $2.5 billion in secured loans, stating that they are frequently difficult to sell prior to maturity.
Additionally, the research is moderately critical of the portfolio’s more legitimate assets. It notes that about half of the assets are held in commercial paper. Although they are rated investment grade, they have an average rating of A-2, a slightly lower rating than that held by a minority of large commercial paper issuers.
USD Coin’s backing
Tether is not the only company whose records have been investigated recently. Regulators and central banks are getting increasingly concerned that stablecoins could endanger financial stability if they continue to rise in popularity. At a recent meeting of US Vice President Joe Biden’s Working Group on Financial Markets, policymakers spent considerable time discussing stablecoins. This pressure has resulted in a rush of stablecoin leaks.
While Tether’s audit has acted as an implicit endorsement, USD Coin has not been so fortunate. Commercial paper, corporate bonds, and other assets similar to Tether are included in the asset, according to a filing last month. Due to the possibility that these assets could lose value at a different rate than the dollar, Coinbase has removed the guarantee that each USDC is backed by an identical dollar amount.
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