Tether Ltd.’s Bahamas-based bank, Deltec, said on Friday that the company’s stablecoin is fully backed by reserves, downplaying resurgent fears about the cryptocurrency’s integrity.
“Every tether is backed by a reserve and their reserve is more than what is in circulation,” Gregory Pepin, Deltec Bank CEO, said on the latest episode of the Unchained Podcast hosted by journalist Laura Shin. “We can see it first hand, so I can confirm that.”
Tether Ltd., the company behind the tether (USDT) stablecoin (which has a value linked to the U.S. dollar on a 1:1 basis), has been long accused of lacking of transparency about the coin’s backing. Indeed, a Tether lawyer said in 2019 each USDT was only about 74% backed by fiat equivalents.
USDT’s market capitalization has grown from $4 billion to an astonishing $24 billion in the past 12 months. Reserves are said by Tether on its website to include “traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities.”
Fears about a shortage of backing resurfaced last week after a Medium post cited the discrepancy between the amount of tether issued during the nine months to September 2020 and the funds held at Bahamas-based domestic banks as evidence of a massive shortage of reserves at Tether.
“There weren’t nearly enough dollars in all the domestic banks in the Bahamas to back the Tethers that were floating around in the crypto market,” the anonymously penned post stated, citing Bahamas central bank figures.
Pepin, however, refuted that claim, stating that Deltec is not a domestic bank and doesn’t have an authorized dealer license, which is needed to hold Bahamian dollars in cash and deposits.
“We cannot take domestic customers and we cannot hold domestic Bahamian dollars. So that report is actually not relevant,” Pepin told Shin. “And actually, if [the post’s author] took a little effort to go and dig a bit about the size of the Bahamian market of banking, [they] would have found out that the entire mass of banks have around $200 billion in assets, I believe. And we are a part of that.”
Pepin also offered clarity on the bank’s recent disclosure of bitcoin purchases for clients, which triggered rumors that it was doing so on behalf of Tether. Both the bank and Tether denied the claim last week.
“We have a very competent and well-respected investment team. And as part of their portfolio education for customers, they actually did an allocation in bitcoin on behalf of those customers,” Pepin said, noting that the 50-year old bank’s customers range from asset managers to high-net-worth individuals.