Tether’s backing could be disclosed later this year

Tether insiders Paolo Ardoino and Stuart Hoegner said they may reveal full details of the reserves backing the controversial digital dollar some time later this year.

“We are contemplating providing an update on tether’s asset backing during 2021,” said Hoegner, speaking on the What Bitcoin Did podcast.

Hoegner is general counsel for Tether and its affiliated entity, cryptocurrency exchange Bitfinex, while Ardoino is the chief technical officer for both.

In April 2019, Hoegner revealed on behalf of Tether that tether tokens were only 74 percent backed by cash held in bank accounts, with the remainder of the backing made up of other assets, including an intracompany loan to Bitfinex.

The disclosure came after the New York Attorney General filed a lawsuit against Tether, alleging that Bitfinex and Tether had engaged in a series of conflicted corporate transactions and that in late 2018 Bitfinex had given itself access to up to $900m of Tether’s cash reserves, without revealing this to investors at the time.

the Bitfinex loan now makes up only 2.5 percent of tether’s asset backing

During the What Bitcoin Did podcast, published today, Hoegner said that this intracompany loan had now been reduced to $550m due to the repayment of principal and interest ahead of time.

As the total market value of tethers in issue has now risen to around $22bn, said Hoegner, the loan now makes up only 2.5 percent of the digital token’s asset backing, compared to 26 percent of reserves in April 2019.

Hoegner said that Tether’s loan to Bitfinex is “good backing” for the digital dollar tokens.

During the podcast, Hoegner and Ardoino said that some of tether’s reserves are in bitcoins, while declining to say how much.

The two executives also didn’t say how much of tether’s backing is now represented by cash.

The question of the asset backing of stablecoins—digital tokens like tether that aim to trade one-for-one with fiat currencies like the US dollar—has risen to prominence during the last two years.

In November, the Bank for International Settlements said that stablecoin volumes could grow “by orders of magnitude” during the coming years.

“We have cooperated with the New York AG’s office for over two years”

Ardoino said during the podcast that Tether’s primary bank is Bahamas-based Deltec Bank & Trust. Asked by podcast host Peter McCormack whether Bitfinex or Tether were shareholders in the bank, Hoegner declined to answer.

In December, the New York Attorney General published a letter saying that Tether and Bitfinex had been cooperating with its inquiry.

The NYAG currently has an injunction in place, barring Tether from loaning Bitfinex any further funds, which is due to expire on January 15.

Tether and Bitfinex are due to submit a number of documents to the New York courts by that date for the injunction to be lifted. However, this deadline has previously been extended several times.

“Bitfinex and Tether have cooperated with the New York AG’s office for over two years,” Hoegner said on the podcast.

“We have produced approximately 2.5m pages of materials. While the AG’s office originally obtained an injunction relating to Tether’s reserves in April 2019, that injunction was substantially narrowed in the ensuing weeks and is not disruptive to the day-to-day business of either Bitfinex or Tether.”

“We get bombarded on a daily basis with requests”

During the podcast Ardoino said that demand for tether tokens is coming from a number of new sources.

“I believe it’s time tether should outgrow the crypto market, which is still our main market,” said Ardoino.

“We are looking at working with businesses that offer remittances and businesses that want to optimise their payments solutions,” said Ardoino. “We get bombarded on a daily basis with requests.”

Questioned about Tether’s ability to screen token users and prevent bad actors from using the digital tokens, Hoegner said his client is now exceeding market best practices.

“Tether has an outstanding compliance programme,” said Hoegner.

“Our anti-money-laundering (AML) and countering the financing of terrorism (CTF) programmes are built to exceed or meet the standards of the US Bank Secrecy Act and applicable British Virgin Islands laws,” he said.

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