{"id":7063,"date":"2022-05-21T12:38:36","date_gmt":"2022-05-21T12:38:36","guid":{"rendered":"https:\/\/newmoneyreview.com\/?p=7063"},"modified":"2022-06-03T07:19:40","modified_gmt":"2022-06-03T07:19:40","slug":"tethers-accountant-waves-red-flag","status":"publish","type":"post","link":"https:\/\/newmoneyreview.com\/index.php\/2022\/05\/21\/tethers-accountant-waves-red-flag\/","title":{"rendered":"Tether\u2019s accountant waves red flag"},"content":{"rendered":"<p>The language used by Tether\u2019s accountant in the latest quarterly attestation report suggests it\u2019s worried about the future existence of the stablecoin.<\/p>\n<p>Tether has since undergone a sharp contraction since <a href=\"https:\/\/newmoneyreview.com\/index.php\/2022\/05\/09\/third-largest-stablecoin-loses-its-dollar-peg\/\">the May 9\/10 collapse of the Terra stablecoin<\/a>, with assets in Tether dropping from $83bn on May 11 to $73bn on May 21.<\/p>\n<p><em>Tether loses $10bn in ten days<\/em><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-7061\" src=\"https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-assets-drop-10bn.jpg\" alt=\"\" width=\"528\" height=\"754\" srcset=\"https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-assets-drop-10bn.jpg 1045w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-assets-drop-10bn-210x300.jpg 210w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-assets-drop-10bn-717x1024.jpg 717w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-assets-drop-10bn-768x1097.jpg 768w\" sizes=\"auto, (max-width: 528px) 100vw, 528px\" \/><\/p>\n<p>This shrinkage was the first significant fall in Tether\u2019s assets since the stablecoin came into existence in 2014.<\/p>\n<p>Nervousness about stablecoins has spread to the market price of Tether tokens, which are supposed to trade 1:1 with the US dollar. On May 12 Tether tokens ($USDT) <a href=\"https:\/\/newmoneyreview.com\/index.php\/2022\/05\/12\/tether-tremors-sink-crypto\/\">fell as low as 92 cents on cryptocurrency exchanges<\/a>, but have since recovered in price to trade close to par value.<\/p>\n<p>However, Tether has still not completely regained its dollar peg and is currently priced at 99.85 cents.<\/p>\n<p>The stablecoin plays a critical role across the cryptocurrency markets, where it is widely used in trading, as collateral and on cryptocurrency deposit and lending platforms.<\/p>\n<p><strong>New going concern language<\/strong><\/p>\n<p>In <a href=\"https:\/\/assets.ctfassets.net\/vyse88cgwfbl\/1np5dpcwuHrWJ4AgUgI3Vn\/e0dac722de3cea07766e05c52773748b\/Tether_Assurance_Consolidated_Reserves_Report_2022-03-31__3_.pdf\">the latest attestation report<\/a>, released on 18 May and relating to Tether\u2019s assets and liabilities on 31 March, accountant MHA Cayman added new language that suggested uncertainty regarding the stablecoin\u2019s future prospects.<\/p>\n<blockquote><p>\u201cWe do not provide any assurance in respect of such assessment\u201d<\/p><\/blockquote>\n<p>In its attestation, accountant MHA Cayman used \u2018going concern\u2019 language, a form of words that implies a business is stable enough to meet its obligations for the time being, but which suggests the accountant is taking a step back in judging the business as viable.<\/p>\n<p>\u201cThe going concern assessment requires significant management judgement with regards to the [Tether] Group\u2019s liquidity, market and credit risks. We do not provide any assurance in respect of such assessment,\u201d MHA Cayman said.<\/p>\n<p>The accountant added other new language to Tether\u2019s attestation, suggesting significant uncertainty with respect to the valuation of Tether\u2019s assets and its exposure to possible counterparty risks.<\/p>\n<p>As at 31 March, Tether held 47 percent of its $83bn assets in potentially less liquid instruments, including commercial paper and certificates of deposit, money market funds, secured loans, corporate bonds, funds and digital tokens.<\/p>\n<p><em>New language added to Tether\u2019s quarterly attestation (in red)<\/em><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-7060\" src=\"https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-31-march.jpg\" alt=\"\" width=\"541\" height=\"518\" srcset=\"https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-31-march.jpg 1153w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-31-march-300x288.jpg 300w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-31-march-1024x981.jpg 1024w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2022\/05\/tether-31-march-768x736.jpg 768w\" sizes=\"auto, (max-width: 541px) 100vw, 541px\" \/><\/p>\n<p>MHA Cayman said it was now valuing loans by Tether to third parties at amortised cost, adjusted for expected credit losses.<\/p>\n<p>It added later in the attestation that no provision for credit losses had been made by Tether\u2019s management at the reporting date. In earlier attestations, the accountant said that loans were valued at fair value.<\/p>\n<blockquote><p>Tether has repeatedly promised an audit but has so far failed to produce one<\/p><\/blockquote>\n<p>MHA also said that the valuation of Tether\u2019s assets had been based upon normal trading conditions and did not reflect any unexpected large-scale sale of assets, or the case of any key custodians or counterparties defaulting or experiencing substantial illiquidity.<\/p>\n<p>Any such defaults or illiquidity, said MHA, \u201cmay result in materially different or delayed realisable values\u201d for Tether\u2019s assets.<\/p>\n<p>Tether does not disclose the details of its reserves, nor its custodians or counterparties.<\/p>\n<p>On May 17, Tether\u2019s chief technology officer, Paolo Ardoino, said that revealing counterparties would be equivalent to showing the stablecoin\u2019s \u2018secret sauce\u2019.<\/p>\n<p>\u201cWe&#8217;re working on an audit (was announced some time ago) and hopefully regulators will push more auditing firms to be more crypto friendly,\u201d <a href=\"https:\/\/twitter.com\/paoloardoino\/status\/1526514413364297730\">Ardoino tweeted<\/a>.<\/p>\n<blockquote><p>\u201cThat is a gigantic red flag\u201d<\/p><\/blockquote>\n<p>Tether has <a href=\"https:\/\/bennettftomlin.com\/2021\/07\/17\/a-history-of-tether-and-bitfinexs-audits-attestations-memos-and-letters-both-promised-and-actual\/\">repeatedly promised an audit but has so far failed to produce one<\/a>. Last July, for example, the stablecoin\u2019s general counsel, Stuart Hoegner, <a href=\"https:\/\/cointelegraph.com\/news\/tether-promises-an-audit-in-months-as-paxos-claims-usdt-is-not-a-real-stablecoin\">promised an audit \u2018within months\u2019<\/a>.<\/p>\n<p>Last week Elizabeth Warren, senator for Massachusetts, <a href=\"https:\/\/twitter.com\/Tethertothe1\/status\/1527656532598562817\">called for a crackdown on cryptocurrency<\/a>, criticising the lack of protections for ordinary investors. In her remarks to the US Senate Banking Committee, Warrant called out Tether for its lack of disclosure.<\/p>\n<p>\u201cAsked why they wouldn\u2019t produce audited financial disclosures, Tether\u2019s executives said it\u2019s because they don\u2019t want to spill their secret sauce,\u201d said Warren.<\/p>\n<p>\u201cI believe Tether doesn\u2019t want investors to know what is and what is not backing up this so-called stablecoin,\u201d said Warren.<\/p>\n<p>\u201cThat is a gigantic red flag,\u201d she said.<\/p>\n<p><em><a href=\"http:\/\/eepurl.com\/du6eTr\">Sign up here<\/a> for the New Money Review newsletter<\/em><\/p>\n<p><em><a href=\"https:\/\/blubrry.com\/newmoneyreview\/\">Click here<\/a> for a full list of episodes of the New Money Review podcast: the future of money in 30 minutes<\/em><\/p>\n<p><span style=\"text-decoration: underline;\">Related content from <em>New Money Review<\/em><\/span><\/p>\n<p><a href=\"https:\/\/newmoneyreview.com\/index.php\/2022\/05\/19\/stablecoins-give-regulators-a-headache\/\">Stablecoins give regulators a headache<\/a><\/p>\n<p><a href=\"https:\/\/newmoneyreview.com\/index.php\/2022\/05\/16\/terra-operators-bailed-out-crypto-whales\/\">Did Terra operators bail out crypto whales?<\/a><\/p>\n<p><a href=\"https:\/\/newmoneyreview.com\/index.php\/2022\/05\/12\/tether-tremors-sink-crypto\/\">Tether tremors sink crypto<\/a><\/p>\n<p><a href=\"https:\/\/newmoneyreview.com\/index.php\/2022\/05\/09\/third-largest-stablecoin-loses-its-dollar-peg\/\">Third-largest stablecoin loses its dollar peg<\/a><\/p>\n<p><a href=\"https:\/\/newmoneyreview.com\/index.php\/2022\/05\/10\/terra-depletes-reserves-in-stablecoin-panic\/\">Terra depletes reserves in stablecoin panic<\/a><\/p>\n<p><a href=\"https:\/\/newmoneyreview.com\/index.php\/2021\/04\/26\/breaking-the-buck\/\">Breaking the buck<\/a><\/p>\n<p><a href=\"https:\/\/newmoneyreview.com\/index.php\/2022\/02\/21\/cordon-off-and-shut-down-defi-says-us-law-professor\/\">Cordon off and shut down DeFi<\/a><\/p>\n<p><a href=\"https:\/\/newmoneyreview.com\/index.php\/2018\/09\/25\/why-settlement-matters\/\">Why settlement matters<\/a><\/p>\n<p><a href=\"https:\/\/newmoneyreview.com\/index.php\/2021\/12\/06\/defi-could-trigger-crash-warns-bis\/\">Unstable DeFi could trigger wider crash<\/a><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The language used by Tether\u2019s accountant in the latest quarterly attestation report suggests it\u2019s worried about the future existence of the stablecoin. Tether has since undergone a sharp contraction since [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":7062,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1013,1012,1053,1054,1014,1011],"tags":[2149,2150,2012,1420],"class_list":{"0":"post-7063","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-account","8":"category-exchange","9":"category-featured-1","10":"category-featured-2","11":"category-payment","12":"category-value","13":"tag-elizabeth-warren","14":"tag-mha-global","15":"tag-stablecoin","16":"tag-tether"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Tether\u2019s accountant waves red flag - 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