Is Tether a sinking ship?
Tether may not exactly be a sinking ship, but if the comments of John Reed Stark, the Former Chief of the SEC’s Office of Internet Enforcement, are to be believed, then Tether is not far from going down. What makes him highlight this prediction about one of the first stablecoins is the fact that Tether has displayed a commitment to transparency and audits, especially audits, but it has never really done anything in practicality.
John, who is currently chairing the post of President at John Reed Stark Consultancy LLC, has said that a promise to audit cannot be taken as the actual audit being done.
Adding to that statement, he has said that there are no regulatory constraints on stablecoins. Hence, putting them under the limelight of being called a red flag. No such regulatory framework makes it mandatory to better or at least manage the reserve. Needless to say, audits and reporting are not mandated either.
Tether has been offering attestations, but they barely match the assurance standard of the audit. Legally, a structured audit displays transparency and the confirmation that the management of reserves is in accordance with favorable policies. Attestations, on the other hand, do nothing but signify an unverified snapshot and confirm that the data is being examined by an attestator.
Paolo Ardoino and Stuart Goegner from Tether once interacted with NCBC for an interview. They promised to conduct an audit in months and not in years. It has been over a year, but Tether has shown no significant steps to get the audit work done.
Tether has responded to this statement rather quickly by publishing the figures for the first quarter of 2023. The published report says that the excess of reserves is at an all-time high of $2.44 billion. Net Profit has also jumped up to touch the mark of $1.48 billion. Consolidated Assets and token circulation stand at $81.8 billion and 20%, respectively. Reserves remain extremely liquid, said the report adding that there has been a reduction of 25% in secured loans for the number to go down to 6.5% from 8.7%.
John has taken note of the same and acknowledged with a tweet wherein he has written that the Attestation Report or Assurance Report is still not the same as the Audit Report. The Former SEC Chief has expressed that he is puzzled with the fact about how a company’s CTO makes a representation and talks about the company’s financial reliability.
Another response from Tether is awaited since John has extended the tweet reminding that Tether is the same financial firm that has been previously sanctioned for lying about their reserves. One example is the NY Attorney General Letitia James noting that the claims made by Tether about its virtual currency being backed by the US Dollar were a lie.
Tether may not be a sinking ship at the moment, but questions like these make the community wonder about how fine a financial firm goes when experts like John Reed Stark are continuously questioning its reporting.