Now that cryptocurrency volatility has hit so-called stablecoins, the group behind Hong Kong-based Tether are hoping an audit can help transparency and return them to safe haven status.
Paolo Ardoino, chief technology officer of Bitfinex, which controls Tether, told Euromoney that the company had commissioned a full audit of Tether from an accounting firm.
Last week, Tether briefly dropped to $0.993 although it quickly regained parity with the dollar. Investors continue to pull money out of stablecoins and several have lost their pegs to their underlying assets.
The market capitalisation of stablecoins had plummeted to $155 billion on Monday from around $181 billion at the start of May, CoinGecko data showed.
Tether, the world’s largest stablecoin has seen its market cap fall to around $68 billion on Monday from over $83 billion in early May.
“Stablecoin market cap goes hand in hand with sentiment and liquidity in crypto markets, and it’s slightly worrying that USDT appears to see another round of liquidations,” crypto digital asset manager IDEG wrote in a note. USDT is the symbol for Tether.
ALSO SEE: Stablecoin Crash That Shook Crypto: All You Need to Know
Lack of Transparency
Bitfinex has been criticised for lack of transparency about its reserves and last year a US regulator fined the company $41 million for misrepresenting how Tether was backed by fiat currency such as dollars and euros.
“Tether misrepresented to customers and the market that Tether maintained sufficient US dollar reserves to back every USDT in circulation,” the Commodity Futures Trading Commission said.
Ardoino said in the Euromoney interview that he hoped the audit would boost confidence in Tether and the stablecoin ecosystem.
But critics said it wouldn’t be enough, adding that the choice of Cayman Islands accounting firm MHA was not positive.
“I see red flags when a financial firm like [Tether] engages a 5-person shop in the Caymans for an ‘attestation’ and then shills it as a valid audit,” John Reed Stark, a former US Securities and Exchange Commission head of internet enforcement, wrote on Twitter.
- Reuters, with additional editing by George Russell
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