Tether, the leading stablecoin issuer, has openly criticized Deutsche Bank following the publication of a research report that casts doubt on the stability of stablecoins, including Tether’s USDT. The report, released on May 7, warns of potential failures akin to the “peso moment,” referencing the disastrous collapse of TerraUSD in 2022, which erased approximately $40 billion from the market.
Deutsche Bank analysts have raised concerns based on their study of 334 currency pegs over the last 223 years, revealing that nearly half of these pegs failed within an eight to ten-year median lifespan. They suggest that most crypto-based pegged assets are likely to face similar “turbulence” due to speculative pressures, which could lead to significant de-pegging events.
The report specifically highlighted Tether’s lack of transparency regarding its reserves, labeling the company’s solvency as “questionable.” In response, Tether has fired back, accusing the bank of making “vague assertions” and lacking substantial evidence in its analysis. “The report’s comparison to Terra, an algorithmic stablecoin, is misleading and irrelevant to the discussion on reserve-backed coins,” stated a Tether spokesperson to Cointelegraph.
Tether’s Rebuttal to Deutsche Bank’s Critique Tether argued that questioning the credibility of any financial institution, particularly one with a history of fines and penalties like Deutsche Bank, is “ironic.” The company emphasized the irony in Deutsche Bank’s position to critique, given its own controversial past.
Despite criticisms regarding its transparency, Tether has shared several financial attestations indicating that it holds over $110 billion in fiat-denominated reserves. Critics, however, maintain that these attestations are not as thorough as a full financial audit. An audit examines data, risks, and compliance issues in depth, whereas an attestation provides only a snapshot of certain data.
In 2021, the New York Attorney General concluded a settlement with Tether, imposing an $18.5 million fine and restricting its operations in the state due to alleged misrepresentations about its reserve backing. Despite these challenges, notable figures such as Howard Lutnick, CEO of Cantor Fitzgerald, have expressed confidence in Tether’s financial holdings.
Conclusion: Stability and Transparency in the Spotlight This ongoing debate highlights the critical issues of stability and transparency within the crypto industry. As stablecoins continue to play a pivotal role in digital finance, the scrutiny from financial institutions and regulators is likely to intensify, pushing companies like Tether to prove their resilience and reliability in an ever-evolving market. The conversation around stablecoin transparency and the potential for regulatory interventions will undoubtedly shape the future of cryptocurrency operations and investor confidence.
