What assets does the USDT reserve include? Tether answers the issuance process and reserve structure

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Tether CTO Paolo Ardoino and General Counsel Stuart Hoegner responded to a series of questions related to issuance, reserves, and compliance that the market cares about.

Interviewee: Paolo Ardoino and Stuart Hoegner, Tether CTO and General Counsel, respectively

Although DeFi is the absolute focus of the cryptocurrency market in 2020, the high popularity of the market has not only resulted in Bitcoin, Ethereum or popular DeFi tokens. Stablecoins are the preferred “bridge” for most investors to participate in the market. The past year has also maintained a momentum of rapid growth.

Although stablecoin projects continue to emerge, USDT, as the overlord of this track, still maintains a market share of over 70%, but behind this “glossy”, the voice of doubt has never stopped. USDT’s continued “savage” issuance has left the market with suspicion about whether its margin is sufficient, and Tether has also been sued for allegedly manipulating the market.

On January 10, 2021, Tether CTO Paolo Ardoino and General Counsel Stuart Hoegner accepted a public interview with Peter McCormack on the podcast ” What Bitcoin Did “. They discussed issues related to distribution, reserves, and compliance in many markets. A series of questions were answered and clarified.

The following is the key information of this interview compiled by the Tether team, and the chain has conducted a certain screening and combing.

Q: What is the standard issuance process of Tether?

Tether issuance consists of four steps: generation-issuance-acceptance-destruction.

The generation and destruction are managed by multi-signature. The generated Token is not in circulation in Tether’s vault, and will not be issued and enter the market until a user deposits the equivalent dollar/fiat currency.

The accepted tokens are also kept in the Tether vault and will be reissued or destroyed according to market demand.

Usually after the token is generated, CTO Paolo will announce it to the whole network through Twitter.

Q: Why is Tether also issued on weekends and holidays?

Normal banks really cannot handle business on weekends and holidays.

What assets does the USDT reserve include? Tether answers the issuance process and reserve structure

Tether’s main bank is Deltec. Tether itself and many users have opened accounts in Deltec. At the same time, Deltec has dedicated personnel to handle peer transfers during weekends and holidays. Therefore, even on weekends and holidays, Tether and users can transfer money together and issue tokens.

However, inter-bank transfers still have to be processed on working days.

Q: What are the usage scenarios for Tether? Which public chains are currently supported? What are the selection criteria?

Tether was born in 2014, when the main application scenario was to solve the liquidity problem in the cryptocurrency ecosystem, with a circulation scale of less than 100 million U.S. dollars.

At present, the main application scenario of Tether is still the cryptocurrency market, but it has also expanded to traditional application scenarios such as retail, payment, trade settlement, and international remittance.

What assets does the USDT reserve include? Tether answers the issuance process and reserve structure

Tether is very cautious in selecting public chains and issuing tokens. The selection criteria include but are not limited to:

  • Extensive community support,
  • Support multi-signature technology,
  • Support hardware wallets,
  • Leading technical capabilities,
  • and many more

Tether currently issues tokens on 7 public chains/protocols, namely:

  • Bitcoin/Omni
  • Bitcoin/Liquid
  • Ethereum/ERC20
  • EOS
  • Tron
  • Algorand
  • Bitcoin Cash/SLP

Q: Is Tether a 100% reserve fund? What is the structure of the reserve fund?

Tether is 100% reserves, and there has not been any acceptance default since its creation. In fact, many Tether users have been using their own examples to prove Tether’s ability to accept large amounts of funds.

What assets does the USDT reserve include? Tether answers the issuance process and reserve structure

Every Tether in circulation has a 100% reserve to ensure acceptance. The reserve includes:

  • U.S. dollar/euro and other legal currencies
  • Cash and cash equivalents
  • Digital assets
  • Loans to third parties (including loans to related entities)

Tether’s initial loan to Bitfinex was US$750M. Bitfinex has been repaying the principal as planned (the actual repayment progress is faster than planned), and paying interest (the interest repayment speed is also faster than planned), and the loan is in good condition. Currently, Bitfinex’s borrowing amount is 550M USD, which only accounts for about 2.5% of Tether’s total market value.

Q: About the so-called “74% reserve fund” circulating on the market

The fact is that on April 30, 2020, in the affidavit filed with the New York Attorney General, Stuart Hoegner (General Counsel) mentioned that “Tether’s cash and cash equivalents account for approximately 74% of the value of circulating Tether.” .

At that time (April 2020), the total circulation of Tether was US$2.1 billion. About 74% of the reserve is cash and cash equivalents, and the remaining 26% is Bitfinex loans. At the time of the interview (January 2021), Tether’s total circulation increased to 24 billion U.S. dollars, and the proportion of loans in the reserve dropped to about 2.5%. Tether is still 100% reserve.

The market rumors about “Tether only has 74% reserves” and other similar rumors are misinterpretations of Stuart Hoegner’s statement and do not conform to the actual situation.

Q: Is Tether a compliance agency? How is the communication with the regulatory authorities?

Tether is a MoneyService organization legally registered in FinCen in the United States and submits routine reports to FinCen to meet FinCen’s compliance requirements. Tether also submits routine reports to the BVI Financial Investigation Agency to meet FIABVI compliance requirements.

In fact, Tether’s implementation standards in the following compliance processes meet or exceed regulatory requirements:

  • KYC-Customer Certification
  • ATF-Anti-terrorism
  • AML-Anti-Money Laundering
  • EDD-Enhanced background check

In other countries and regions outside the United States, Tether has also been communicating with regulatory agencies to exchange/learn/adapt to local regulatory policies.

Tether also assists law enforcement agencies worldwide in tracking suspicious funds and assisting victims in recovering stolen funds.

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