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A full audit of Tether's reserves is still months away, says company's CTO

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(Kitco News) - Tether Holdings Limited, the company that issues the crypto industry’s largest stablecoin Tether (USDT), continues to raise eyebrows as it has once again pushed the promised full audit of its reserves to an unknown date in the future.

The revelation came from the project’s chief technology officer Paolo Ardonio during an interview on Friday in which the public face of the company told the Wall Street Journal that any such review is still “likely months” away.

Not many in the crypto industry are shocked by this revelation, as Tether has been promising to conduct a full audit on its reserves since 2017 but has yet to deliver. “Things are going slower than…we would like,” Ardonio said.

The company recently made headlines when it announced that it had partnered with BDO Italia to conduct regular reviews and attestations of its dollar reserves, which provide a snapshot of reserves and liabilities which are then signed off on by an accounting firm like BDO.

Attestations allow crypto companies to sign off on the numbers provided for a specific time and date without testing the transactions before or after that date, so the data can sometimes be misleading.

For example, Tether was able to skew its attestation in 2017 by having its sister company Bitfinex transfer $382 million into its bank account just hours before the numbers were reviewed by accountants, according to the Commodity Futures Trading Commission.

Audits tend to be more thorough than other types of attestation and have stricter guidelines that must be followed to help combat these types of problems. According to John Reed Stark, former head of internet enforcement at the Securities and Exchange Commission, “Tether needs an audit that’s akin to a corporate colonoscopy, that tells investors everything about what’s in their reserves.”

Through its partnership with BDO, Tether intends to start releasing monthly attestation reports similar to what other stablecoin projects currently do.

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Crypto market collapse brings increased scrutiny

The matter of Tether’s reserves has once again become a focal point following the collapse of several stablecoin projects in 2022, including Terra Luna’s TerraUSD (UST) stablecoin, whose collapse sparked a contagion effect that spread across the crypto ecosystem.

Numbers released by Tether on Aug. 25 show that it has $67.7 billion in reported assets as compared to $65.7 billion in liabilities, a difference of just $191 million or 0.3%. That means that if the assets held by Tether drop just 0.3% in value, the stablecoin would be technically insolvent, which could lead to a reduction in investor confidence and spark a surge in redemptions.

These concerns are not unknown to Tether, with Ardonio indicating that the company plans to grow its capital cushion “significantly over the next few months” as rising interest rates boost the returns from its currently held assets.

Citing the company’s ability to redeem $7 billion of customer funds during a 48 hours window in the recent crypto crash, Ardonio said, “I don’t think we are the systemic risk in [the crypto] system.”

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