Evaluating Quality of Attestations from Tether Audits Over Time

Tether is one of the most widely used stablecoins in the cryptocurrency market today. As a stablecoin, Tether aims to maintain a 1:1 peg to the U.S. dollar. This means each Tether token issued should be fully backed by $1 held in reserves by Tether.

Given Tether's importance to overall crypto market stability and trading, the quality of its attestations from periodic audits is critical. Examining how audit quality has evolved over time provides insights into Tether's reserves, transparency, and impact on the crypto ecosystem.

History of Tether's Audits

Tether's first public attestations came from audits by the firm Friedman LLP in 2017. These initial audits simply stated Friedman found Tether had enough reserves to back all outstanding USDT tokens on a given date. No details were provided on the specific assets held or the firms managing reserves.

This limited transparency led to growing scrutiny around whether Tether truly held sufficient dollar reserves. To help allay concerns, Tether moved to obtain attestation reports from a more reputable auditor - Grant Thornton - in 2018.

Grant Thornton's 2018 Attestations

Grant Thornton's attestations provided more details than earlier reports. The accounting firm specified the total balances of Tether's reserves and confirmed these accounts held enough USD to cover the stated amount of outstanding USDT.

However, concerns remained around the vague nature of how reserves were described. Tether holdings were referred to simply as “bank accounts” without further specifics on assets held or custodians managing funds.

In May 2021, Tether took steps to provide their most detailed audit attestation to date. They engaged the law firm MNY Legal to evaluate Tether’s reserves and issue a public report.

This report contained more granular details on reserve composition. It confirmed Tether held over $60 billion in custody accounts across multiple banks. Commercial paper and certificates of deposit were called out as specific asset types held.

However, the report still contained some vagueness. The names of banking partners were anonymized and commercial paper issuers were not identified. Tether’s reserves were simply summarized in broad percentages across asset classes.

BDO Cayman Islands Assurance in 2022

In August 2022, Tether released its latest attestation report conducted by accounting firm BDO Cayman Islands. This audit provided the most transparency to date on Tether's reserves.

Specific cash balances were detailed across Tether’s custodians, which were named as Deltec Bank & Trust and Centre Consortium. Holdings in U.S. Treasuries and other assets were also disclosed.

The report summarized reserves using categories aligned with accounting standards for custody of customer funds. This provided improved clarity on the assets backing USDT tokens.

However, the attestation still contained limitations. Only a snapshot of reserves was provided on a specific day rather than evaluation of balances over an extended period. Commercial paper could not be fully validated.

Evolution Shows Improving Transparency

Reviewing the evolution of Tether’s attestations over the past 5 years shows a trend toward improved transparency. Early vague claims of sufficient reserves have transitioned to disclosures of specific assets held across named custodians.

However, limitations remain compared to full official audits. Attestations rely on summaries of reserve balances on a given date rather than rigorous evaluation of figures over time. Some details on commercial paper and certificates of deposit remain obscured.

As one of the most systemically important stablecoins, Tether should continue improving transparency. But its attestations provide far greater insights on reserve holdings today compared to when first launched.

"While questions still remain, Tether's gradual reveal of its reserves indicates it is moving in the right direction - albeit slowly."

Key Takeaways

  • Tether's first attestations provided limited detail on actual assets backing USDT, leading to questions around reserves.
  • Over time, attestations have evolved to name specific custodians, disclose reserve balances, and categorize asset types held.
  • However, limitations persist compared to full official audits that rigorously scrutinize figures over an extended period.
  • On balance, Tether has made significant strides in transparency from its early days. But as a systemically vital stablecoin, there is more work to be done.

Should Tether Undergo Official Audits?

Tether has resisted seeking full official audits by major accounting firms. Instead, it has relied on attestation reports offering snapshots of reserves at a point in time. This approach sidesteps the scrutiny of evaluating Tether's figures over an extended time horizon.

An official audit could either validate Tether is fully backed or reveal deficiencies in reserves. For a stablecoin of its systemic importance, providing this high level of transparency seems warranted.

Of course, audits also entail arduous preparation by the company and substantial expense. Tether may view periodic attestations as sufficient. But the crypto community's trust could be reinforced with the accountability from recurring official audits covering long time frames.

If its reserves are truly as robust as claimed, Tether has little to fear from embracing formal audits. The benefits of removing any doubts on backing and stability likely outweigh the costs. Perhaps customer demand, regulatory pressures, or competitive dynamics will ultimately force Tether's hand in pursuing full audits. For now, its gradual reveal of holdings indicates a measured approach.

Can Tether Remain the Dominant Stablecoin?

Tether has dominated the stablecoin space since its inception, maintaining its #1 position by market capitalization. However, as transparency expectations rise for systemically critical assets, rival stablecoins are emerging as alternatives.

Regulatory compliant stablecoins like USD Coin and Paxos have gained traction. These fiat-backed offerings provide routine official attestations of reserves.Decentralized algorithmic stablecoins like DAI also offer advantages of crypto-native transparency.

Tether enjoys first-mover advantage and integration with major exchanges. But limited transparency risks opening the door to rivals chipping away its market share over time. Competitors are eager to tout official audits and transparency as compared to Tether's attestations.

If Tether remains resistant toward full audits, it may see declines in prominence. Then again, network effects and brand recognition are formidable. Tether's past resilience even amidst controversy and criticism suggests it may hold strong despite transparency concerns. Still, the clock ticks as new entrants attack stablecoin market share. How Tether navigates transparency demands could determine its long-term dominance.


Evaluating the evolution of Tether's attestation reports over the past 5 years shows notable strides - but also remaining limitations compared to comprehensive official audits. As the most widely used stablecoin, Tether plays a pivotal role in the overall crypto ecosystem. Ensuring its reserves are fully backed as claimed remains vitally important for market stability and trust.

While Tether has become gradually more transparent, regularly undergoing full third party financial audits could further bolster confidence. As regulation of stablecoins advances and competition intensifies, market forces may compel Tether toward greater transparency regardless of its current reticence. For now, its attestations offer improved - though still limited - insights into its reserves and operations. Ongoing scrutiny around Tether's backing and why it shies from official audits will persist in the years ahead.

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