Judge Orders Tether to Produce Records on Stablecoin Backing

A judge for the Southern District of New York ordered the issuer of the largest stablecoin to produce financial records related to the backing of its coin, tether. 

Tether Holdings Ltd., the issuer of the world’s largest stablecoin, will need to produce balance sheets, income statements, cash-flow statements and profit-and-loss statements under the order. It also will have to provide documents to establish sufficient reserves for its stablecoin, tether, including account statements for all its banks. 

The documents are being requested as part of a continuing lawsuit alleging that Tether conspired to issue its stablecoin as part of a campaign to inflate the price of bitcoin. Yet the documents could provide information long sought about the quality of assets supporting the nearly $68 billion stablecoin. 

A spokesman for Tether said that the order was routine and “does not in any way substantiate plaintiffs’ meritless claims.” The company has asserted that its stablecoin is fully backed and that one tether is redeemable for $1. 

Tether said it had already agreed to give records establishing the backing of its stablecoin. “This dispute merely concerned the scope of documents to be produced. As always, we look forward to dispensing with plaintiffs’ baseless lawsuit in due course,” he added. 

So-called stablecoins get their name from their peg to government-issued currencies such as the U.S. dollar. Their popularity has surged over the past two years, helping grease a boom in cryptocurrency trading, because they are nonvolatile assets to trade against and can be quickly deployed if traders want to buy or sell a cryptocurrency. 

Stablecoins also present a lucrative business model with interest rates rising on short-dated Treasurys as the Federal Reserve tightens policy. Securities rules mean that stablecoin issuers can’t pass on interest to coin holders, leaving more profits for the company. 

Tether, like other leading stablecoins, publishes an “attestation” showing a snapshot of its reserves and liabilities, signed off on by its accounting firm, rather than more-thorough audits

The composition of the reserves backing the stablecoin tether has long been a topic of debate. In 2021, Tether settled a nearly two-year investigation by the New York attorney general’s office into it and the operator of the Bitfinex cryptocurrency exchange. Alongside the settlement, Tether agreed to publicly release quarterly statements detailing its reserves.

—Vicky Ge Huang contributed to this article

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Leave a Reply

Your email address will not be published.

%d bloggers like this: