Tether Limited, the issuer of stablecoin Tether (USDT) wholly-owned by Bitfinex, has opened a bank account with Bahamas-based Deltec Bank. The move follows a long process of due diligence review of the company, including the ability to maintain the USD peg at any moment in time, the announcement says.
Deltec Accepts Tether as Client After Long Due Diligence Process, Company Says
The 72-year-old financial institution with headquarters in the Commonwealth of The Bahamas has accepted Tether as a client. The news comes as a milestone for Tether following months of tribulation as many questioned whether the firm had enough USD to match the number of Tether tokens distributed on the Bitfinex platform.
Tether said in a statement:
“The acceptance of Tether Limited as a client of Deltec came after their due diligence review of our company. 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.”
Tether Limited, which is registered with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, claims all USDT in the market is fully backed by U.S. dollars “that are safely deposited in our bank accounts.”
While many questioned the veracity of the claim, the controversy surrounding the stablecoin only intensified when consulting services firm Friedman LLP decided to end the relationship with Tether because the firm denied access to their accounts.
In late October 2018, the company announced it had burned 500 million tokens, supposedly worth $500 million. Tether wasn’t clear about the reasons why it did proceed to burn units. Some believe Bitfinex funded the redemption by selling 100,000 BTC to remove the amount of circulating supply from the market, partly because of new strong competition coming from the U.S., with Coinbase announcing support for Circle’s new stablecoin, USDC.
Tether is only confirming previous reports that the firm opened a bank account with Deltec Bank. People familiar with the situation told The Block that the arrangement was made weeks ago and some over-the-counter trading desks have already shown interest in doing the same in order to redeem USDT directly.
Tether, which was on the top five cryptocurrencies by market cap for a long time, saw its position falling apart in October. Its market cap crashed to $1.7 billion from $2.8 billion in a matter of weeks and it hasn’t stopped bleeding yet. The announced new banking relationship might ease the pressure, but the USDT is still trading at $0.98, which indicates a lack of trust in the market.
One side-effect of the panic regarding the true value of Tether was the run towards Bitcoin, which pushed the number one cryptocurrency to the $7,500 area as USDT holders dumped the token. Investors were willing to pay a $300 premium on Bitcoin in order to get rid of the stablecoin.
Featured image from Shutterstock.