BY CNA Team - November 2, 2018
Tether confirms banking relationship with Deltec
Tether, the startup behind the eponymous stablecoin, has finally confirmed a banking relationship with Deltec Bank after several weeks of speculation.
The controversial startup, which has overlapping ownership and management with crypto exchange Bitfinex, has shared the same problems with the exchange in having issues accessing banking services.
Ever since Tether and Bitfinex stopped their banking relationship with the failing Noble Bank, a bank from Puerto Rico, there have been speculation over Tether’s bank access, important for those wanting to trade and fiat out of the stablecoin.
In an announcement dated Nov 1, the startup confirmed the banking relationship with Deltec, a 72-year old financial institution based in Nassau, Bahamas.
This also confirmed earlier reports that Tether has placed all its US dollar reserves in Deltec. Sister startup Bitfinex has opened an account with Shanghai-based Bank of Communications (BoCom), after HSBC shut down its account last month. Interestingly, HSBC also has a 19.9% stake in BoCom.
Tether says its acceptance as a client of the bank came after Deltec’s due diligence review of the startup.
“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 US dollar-peg at any moment and our treasury management policies,” it adds.
It noted that the due diligence process was conducted over a period of several months and garnered positive results, which led to the opening of the bank account.
Tether reassured investors that the stablecoin is fully backed by US dollars deposited with Deltec.
Accompanying the announcement, Tether also released a letter from Deltec confirming that, as at the close of business on Oct 31, the startup had US$1.83bil deposited with the bank.
However, the bank says the letter was provided without any liability, to Deltec’s officers, directors, employees and shareholders, and is solely based on information currently in its possession.
Notably, the letter was signed off without a name or designation of the person who released the letter.
Tether has come under criticism and scrutiny for how these “confirmations” of its US dollar holdings have been done.
There have been no full audits for what it claims are enough US dollar reserves to fully back the tether stablecoin, which is tethered on a one-for-one basis with the greenback.
Together with problems accessing bank services, this has caused the stablecoin’s price to fluctuate wildly and as of press time, it has declined 0.22% over a 24-hour period, to 98.75 US cents according to CoinMarketCap data.
It has fallen to as low as 92.52 US cents on Oct 15.
Image courtesy of Tether website.