Business 8 November 2018Erik Gibbs
Tether’s new banking partner already in hot water
For all of 2018, cryptocurrency enthusiasts have wanted more transparency of the Tether stablecoin. As far back as January, there have been concerns over the coin’s stability, attributed to the fact that it has not been able to hold onto auditors and hasn’t been willing to release financial reports. Most recently, Tether saw its price come unglued, even though it’s reportedly pegged to the U.S. dollar, after news broke that the bank formerly holding the funds that supposedly back the coin, Noble Bank, was having financial difficulty. Now, its new banking partner is the target of regulators, painting a grim picture for the bank, as well as Tether.
According to the Brazilian media outlet O Globo, Brazil’s Deltec Bank & Trust may have run afoul of regulators. There is an allegation circulating that the bank may have been involved in a large money-laundering scheme that involves a Brazilian government official. The official reportedly funneled $25 million through a bank in Panama and then back into Brazil through Deltec. Given that the transfer supposedly took place in a single transaction, many are wondering whether Deltec was involved in facilitating the activity or, at the very least, why it didn’t question the activity.
The investigation into the bank’s activity only further worsens Tether’s stance in the market. Earlier this week, Tether spoke highly of Deltec and said that the partnership between the two entities should be seen as legitimizing Tether. It said at the time, “This included, notably, an analysis of our compliance processes, policies and procedures; a full background check of the shareholders, ultimate beneficiaries and officers of our company; and assessments of our ability to maintain the USD-peg at any moment and our treasury management policies.”
However, that analysis now seems to have been either grossly exaggerated or is non-existent. In either case, it leaves the crypto community seriously concerned about the viability of Tether and whether or not those behind the stablecoin are actually fit to continue to manage its operations. To date, Tether has not been able to produce confirmed records indicating that it definitively holds enough fiat to cover the $1.7 billion in coins currently in circulation and the general consensus is that the funds are nonexistent.
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