Since the TerraUSD crashed in early May, more than $10bn in Tether has been withdrawn from the blockchain.
Consumers have converted their cryptocurrencies into stablecoins that they believe are better regulated and provide them with safer long-term options, and more importantly – stability.
Withdrawals have continued even though Tether has reassured consumers that liquidity is all accounted for.
The company has been investing heavily in traditional financial assets, such as US Treasury bills and bonds in private companies to ensure that its supply is guaranteed and that Tether cannot become the victim of volatility, price swings or complete devaluation.
But not everyone is sure if these numbers are sufficient to avoid an apocalyptic scenario similar to what happened to TerraUSD.
In fact, many have questioned whether this investment can safeguard Tether against a fate similar to that suffered by TerraUSD.
Why the uncertainty? Tether has always prided itself on a simple fact – all its reserves are backed by the US dollar, making it a truly stable digital asset, which won’t fall for some sudden and inexplicable price swings.
However, an investigation by the New York attorney general’s office indicated that there have been some serious omissions in the way the Tether reserves are backed.
In fact, not all of them were put in US dollar. That is why Tether will now have to put forward quarterly statements, focusing on its reserves and where they are.
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