Tether Initiates Audit of USDT Reserves Amid Regulatory Scrutiny

Tether, the issuer of the widely used USDT stablecoin, has initiated discussions with one of the Big Four accounting firms to conduct a comprehensive audit of its financial reserves. This move comes as the company faces increasing scrutiny over its transparency and the backing of its stablecoin. CEO Paolo Ardoino has confirmed that the audit is a top priority, aiming to provide clarity about the assets that support USDT. Tether has not disclosed which firm—PwC, EY, Deloitte, or KPMG—is handling the audit process, but the company is committed to demonstrating that its reserves are adequately backed and transparently managed.

Ask Aime: What is the impact of Tether's audit of its stablecoin reserves on the USDT's market value?

This decision follows years of criticism and regulatory challenges. Tether has long claimed that each USDT token is backed 1:1 by reserves, but critics have questioned the company's lack of independent verification. In 2021, the U.S. Commodity Futures Trading Commission fined Tether $41 million for misleading claims about its reserves. Additionally, an investigation by the New York attorney general found that Tether had made false statements about its token's backing, leading to the company ceasing operations in New York.

Despite these setbacks, Tether has continued to grow. The company reported a record $13.7 billion profit in 2024, more than double the $6.2 billion profit it posted in 2023. This financial performance places Tether in close competition with major financial firms. The widespread use of USDT, which facilitates fast transactions within the crypto market, has been a significant driver of Tether's success.

Tether's operations have faced challenges in Europe. The EU’s MiCA regulations have forced exchanges like Crypto.com to delist USDT due to the token’s lack of appropriate licensing. Tether has expressed disappointment with these actions, calling them premature and not based on clear reasoning.

In preparation for the audit, Tether appointed Simon McWilliams as its new CFO in 2024. The company’s reserves are managed by Cantor Fitzgerald, a firm formerly led by the U.S. Commerce Secretary. With the audit now a priority, Tether aims to reassure investors and regulators by demonstrating that its reserves are adequately backed and transparently managed. A full audit would provide clearer proof that USDT is properly backed, addressing concerns that have lingered in the crypto community.

Ardoino emphasized that securing an audit is now a top priority for the company, especially with rising interest from the U.S. government in integrating stablecoins into the financial system. His comments follow a recent statement from Donald Trump, who spoke about stablecoins as a way to strengthen the U.S. dollar's global role. Ardoino suggested that this high-level support could push major auditing firms to take Tether’s request more seriously.

Despite this, community skepticism remains high. Tether has made similar promises in the past but has never followed through with a full, independent audit. While internal reports are published regularly and a new CFO has taken over, critics argue these moves fall short of true transparency. Some believe Tether may seek a limited audit focused only on its reserves, but full audits are expected under the proposed GENIUS Act, which outlines strict rules for stablecoin issuers.

Under the GENIUS Act, companies issuing stablecoins would be required to undergo external audits and maintain reserves in secure assets like U.S. Treasury bonds. Tether claims it already holds a significant amount in such assets, reporting $33 billion in Treasury purchases last year. However, most of these assets are held by Cantor Fitzgerald, a financial firm closely connected to Tether. This link has raised concerns, especially since Cantor Fitzgerald’s former CEO, Howard Lutnick, recently became the U.S. Secretary of Commerce. Critics like Jason Calcanis argue that Tether’s reputation and political ties warrant stronger oversight. He insists Tether should not be allowed to hold U.S. Treasuries until it passes an in-depth audit going back to its early operations.

Tether made massive profits last year, suggesting it has the resources to fund a full audit. Still, doubts remain about whether the company is willing to undergo the level of scrutiny required. Without compliance, Tether’s ability to operate in the U.S. may be at risk, despite its strong positioning and influence. The crypto community is watching closely to see whether Tether will finally deliver on its audit promise. As stablecoin regulations move forward, passing a proper audit will be crucial for the company to secure its future in the regulated U.S. market and potentially form partnerships with government entities.