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Tether Criticizes Deutsche Bank’s Negative Assessment of Its Stablecoin

May 10, 2024 at 12:58

Tether, a leading stablecoin issuer, has openly criticized Deutsche Bank following a report by the bank which suggested potential failures within the stablecoin sector, including Tether’s own USDT. The report drew parallels to historical currency de-peg events and highlighted the 2022 collapse of TerraUSD, which erased approximately $40 billion from the market, to underline the vulnerabilities in dollar-pegged stablecoins.

Deutsche Bank’s analysts, having reviewed 334 currency pegs from the past 223 years, found that nearly half of these pegs failed within their median lifespan of eight to ten years. They predicted significant instability for crypto-based pegged assets, citing opaque operations and susceptibility to speculative fluctuations as likely causes for future de-pegging incidents.

The report specifically called out Tether for a lack of transparency regarding its reserves and questioned the firm’s solvency. Tether responded sharply, criticizing the report for its lack of detailed evidence and clear analysis, dismissing it as relying on “vague assertions.”

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A Tether spokesperson highlighted the misleading comparison of Tether, a reserve-backed stablecoin, to Terra, which was algorithmic, as inappropriate. They commented to Cointelegraph that Deutsche Bank’s troubled history of fines and penalties made its criticisms appear ironic and hypocritical.

Tether has faced scrutiny over the transparency of its reserves in the past. Despite this, the company has issued several financial attestations indicating it holds more than $110 billion in fiat-denominated reserves, a claim that some critics argue lacks the rigor of a full financial audit. Unlike audits that examine broader data and compliance, an attestation provides a simpler snapshot of financial data at a given time.

In 2021, Tether agreed to an $18.5 million settlement with the New York Attorney General, who accused it of misrepresenting the backing of its stablecoin with fiat collateral, subsequently banning it from operating in New York.

Despite these controversies and the absence of a formal audit since its inception in 2014, Howard Lutnick, CEO of Cantor Fitzgerald, has expressed confidence in Tether’s financial integrity, stating he believes the firm “has the money” necessary to back its stablecoin.

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