Tether’s Banking Relationships, Commercial Paper Exposure Detailed in Newly Released Legal Documents

Obtained by CoinDesk under a Freedom of Information Law request, the documents offer a rare but limited window into the reserves behind USDT, the crypto market’s largest stablecoin.

AccessTimeIconJun 16, 2023 at 3:11 p.m. UTC
Updated Jun 20, 2023 at 3:47 p.m. UTC

Stablecoin issuer Tether kept its funds in four banks, two investment management firms, two gold depositories and a gold broker and on its own sister company Bitfinex in March 2021, documents obtained by CoinDesk show.

It also had funds in commercial paper and other securities issued by various entities, including the Qatar National Bank QPSC, Barclays Bank PLC, Deutsche Bank AG, Emirates NBD Bank PJSC and Natwest Group PLC. And a large percent of its issuers were various Chinese banks and financial institutions.

Tether’s past reliance on commercial paper is not news. The company, which issues and maintains the world’s largest stablecoin by market capitalization, acknowledged putting funds in commercial paper in 2021. But the extent to which the company relied on this type of asset was not previously known.

The Agricultural Bank of China Ltd, Bank of China Hong Kong, Bank of Communications Co Ltd, Industrial and Commercial Bank of China, China Merchants Bank, China Construction Bank, China Everbright Bank Co and more all issued commercial paper and securities that Tether used to back its token.

Editor’s note: This article is based on documents received via a Freedom of Information Law request to the New York Attorney General’s office. CoinDesk is reviewing the documents, in part to ensure no individual’s private information is inadvertently shared and redacting where appropriate before releasing them in full.

On March 31, 2021, Tether claimed it had more than $35.5 billion in U.S. dollar equivalents at these institutions, according to the documents. They were shared with CoinDesk by the New York Attorney General’s office (NYAG) in response to a state Freedom of Information Law (FOIL) request filed in June 2021. The documents appear to have been created on Aug. 4, 2021, and serve as a snapshot of Tether’s operations on that day. A further $5.1 billion were detailed under “USDT lending” and other assets, for an asset total of $40.6 billion, roughly matching the 40.8 billion USDT in circulation at the time.

As such, the documents offer a rare but limited window into Tether’s finances, long a subject of controversy and conjecture in the crypto industry. When Attorney General Letitia James announced her office’s settlement with Tether in February 2021, she said there had been times in 2017 and 2018 when USDT, Tether’s stablecoin, was not fully backed. The new documents, created six months after the settlement of NYAG’s investigation, neither prove nor disprove that claim.

They do, however, add one more piece to the puzzle of where Tether stores the assets backing the token. Over the years, information about the company’s banking relationships has come out only in dribs and drabs.

Tether (USDT) is the world’s largest stablecoin, holding a significant role as the counterparty asset for crypto trades on countless exchanges. It is designed to hold its value against the U.S. dollar, with Tether claiming it holds at least a dollar’s worth of assets in reserve for every single USDT token in circulation. The company has long been dogged by concerns that USDT has been less than fully backed, concerns the New York State Attorney General’s office seemingly vindicated in April 2019 when it announced that Tether had loaned some $850 million in reserves to Bitfinex, an exchange it shares corporate officers and parentage with. Bitfinex lost access to that amount of its own funds when its payment processor was seized by authorities.

In its FOIL request, CoinDesk requested documents detailing the USDT stablecoin’s backing after Tether published its first public document laying out what its reserves were composed of. At the time, nearly half was in unspecified commercial paper.

In announcing its settlement with the NYAG’s office in 2021, Tether claimed it would publish the same information it shared with the NYAG on its reserves for at least two years. Its first public release, in May 2021, amounted to a pair of pie charts and a brief statement.

A portfolio report in the released documents, dated April 7, 2021, contains similar pie charts but far more information, providing specific U.S. dollar amounts for Tether’s reserves. Information pertaining to actual fixed-term deposits was redacted, but shows Tether held millions in reserves in certificates of deposit, bonds and especially in commercial paper.

According to a letter dated June 4, 2021, Tether kept funds in Ansbacher (Bahamas) Limited (confirming Forbes reporting from February of this year) and Capital Union Bank in the Bahamas (the latter relationship was previously reported by the Financial Times) and Far Eastern International Bank in Taiwan (Tether’s use of Taiwanese banks was previously reported by Bloomberg, though no names were given). However, the vast majority of its assets were in Bahamas-based Deltec Bank and Trust – more than $26 billion as of March that year. (The Deltec relationship has been public since November 2018, when Tether released a letter on the bank’s letterhead, which famously bore a squiggle of a signature and no employee’s name. Deltec’s chairman later confirmed to CoinDesk the document was authentic.)

Tether reserves

According to CoinGecko, there were $40.8 billion worth of USDT in circulation as of 10:30 p.m. ET on March 31, 2021.

The same document goes on to detail what assets were in each of the respective institution's holdings, confirming that Tether had a significant amount of its reserves in commercial paper.

Tether reserves by asset class

Another portfolio report, issued by Ansbacher, further breaks down these details, showing that nearly 85% of Tether’s holdings at the financial institution were commercial paper. Corporate bonds made up the bulk of the remainder, with 13.7% of Tether’s holdings taking that form. High yield bonds, floating rate notes and credit accounts made up the remainder.

The document was not signed.

Similarly, Capital Union Bank provided a report which said nearly 88% of Tether’s holdings were “liquid assets,” though it did not provide a further breakdown.

Several of these documents detail the Tether legal team’s communications with the NYAG’s office immediately after they settled the regulator’s long-running inquiry into Tether.

According to one of these communications, the NYAG’s office had questions about Tether’s commercial paper holdings after the settlement.

“Regarding Tether’s acquisition of commercial paper assets, Tether maintains accounts at different banks as identified in our prior letter. Tether requests quotes for commercial paper offerings from those banks who, in turn, request these from brokers and other counterparties who either deal directly with issuers for the issuance of commercial paper, or who deal on secondary markets to purchase commercial paper,” read a letter from Tether’s outside counsel sent on June 25, 2021.

CoinDesk obtained the documents after a nearly two-year legal battle after Tether filed to block the NYAG from releasing them. Klaris Law represented CoinDesk in court, securing a victory in February.

Prior to the publication of this article, Tether published a statement acknowledging the NYAG FOIL officer’s release of the documents after the company did not take the steps necessary to appeal a court decision ordering the documents be shared. A second statement published Friday purported to detail what was in the documents.

“Tether initiated these proceedings in the first instance to prevent the public dissemination of confidential customer data and to prevent the use of sensitive commercial information that could potentially be exploited by malicious actors,” the first statement said. “However, our ongoing and demonstrable commitment to transparency means that we must prioritize openness over further time-consuming and unproductive American litigation that distracts from the real issues facing our community.”

Tether did not immediately respond to a detailed list of questions about some of the documents.

In its statement, Tether also said it “found it suspicious” that USDT depegged after millions of dollars’ worth were sold on decentralized finance pools “on the same day” that the New York government shared the documents with CoinDesk.

In fact, the stablecoin briefly lost its peg prior to 07:00 UTC (3:00 a.m. ET) on June 15, at least five hours before the NYAG FOIL officer shared the documents with CoinDesk’s attorneys.

“CoinDesk learned from our lawyers on June 12 that we would finally receive the documents after a long court dispute in which Tether tried to block their disclosure,” said Marc Hochstein, Executive Editor of CoinDesk. “We did not share the news of our win with anyone outside our editorial staff until after we received the documents on the morning of June 15 in New York, hours after USDT lost its peg. CoinDesk stands by the integrity of our reporting.”

Edited by Marc Hochstein, James Rubin, Pete Pachal and Michael J. Casey.

UPDATE (June 16, 2023, 15:55 UTC): Clarifies that Tether may have had funds in other unspecified securities in addition to commercial paper.


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.