I've covered crypto since 2013 and know most of the people and major players pretty well. But there’s one company that's remained an enigma this whole time: Tether. Its current market cap is around $85 billion, putting it in the same league as Uber and CVS, but what goes on under the hood is anyone's guess.
On Tuesday, Tether published one of its semi-regular "attestations" to tell us that everything is grand and, in fact, better than ever. According to the company, its reserves—by which it keeps its USDT stablecoin fixed at $1—are healthy and even reflect a $3.2 billion surplus. Meanwhile, Tether says the portion of those reserves backed by secured loans are down to $2 billion while the rest is made up of firmer stuff like T-bills, gold, and Bitcoin. If this is the case, the USDT peg is stronger than ever.
Tether is also literally printing money. Since it pays no returns to those who hold its coins, even in this high-interest-rate environment, the company pocketed a reported profit of more than $1 billion last quarter. Right now, Tether is sitting on what has got to be the best business in crypto.
In theory at least. The problem, as always with Tether, is that we have to take what the company says on faith. Sure, it received its "attestation" saying everything is in order, but that assurance comes from an off-brand accounting firm in Italy. If Tether wants everyone to take an attestation seriously, it should go get one in the form of an audit from one of the Big Four. Why has it failed to do so?
One possibility is that it can't—the big consulting firms may have decided, at a time when the White House is trying to strangle crypto, that it is simply not worth the trouble of taking on a client like Tether. It's also possible that the shadowy executives who run the stablecoin giant have decided that, since they're making money hand over fist, there's no upside to going through the time and trouble of an audit.
As for just how shadowy Tether really is, we just don't know. Bloomberg's Matt Levine put it well when he said the answer could be any of: "1. tether is extremely legit, except for that one time, and they just like *pretending* to be shady (why?) 2. tether was shady, but rising rates and fallen competitors mean that it stumbled into a good legit business 3. remains shady (in what way?)." I suspect it's number 2 but, like Levine and everyone else, I can only guess.
If we accept that Tether is bigger and doing better than ever, that doesn't reflect well on U.S. crypto policy. Even as the Justice Department and SEC have been rightfully cracking down on many fly-by-night crypto scams—and massive frauds (Hi, Sam!)—the White House has also tried to kneecap even the most legitimate crypto companies in the U.S. If the Biden administration had instead backed stablecoin legislation, it's likely that the USDC stablecoin—run by Circle and Coinbase—would not have lost so much ground to an unregulated offshore wildcatter.
It will be interesting to see how the stablecoin industry evolves over the course of the next bull market. But now, it's pretty clear that Tether is riding high.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
