While Tether is boasting about its strong market position, Wall Street Journal’s (WSJ) recent article claimed its weak balance sheet and even a 0.3% drop in its reserve assets could make Tether insolvent.
The article published by WSJ journalists Jean Eaglesham and Vicky Ge Huang on August 27 highlighted the USDT reserve’s volatility and delay in the audit since 2017.
“A 0.3% fall in assets could render Tether technically insolvent — a development that skeptics warn could reduce investor confidence and spur an increase in redemptions,” they said.
At the time of writing, Tether’s website reflects $67.74 billion worth of assets in its reserve against $67.54 billion worth of liabilities. This means the difference between its liabilities and reserve is just $191 million.
However, Tether CTO, Paolo Ardoino stated that he is aware of Tether’s tight margin and he doesn’t see any “systemic risk in the cryptosystem.”
Paolo Ardoino is expecting growth in the capital over the next few months.
According to Ardoino, despite the recent instability in the cryptocurrency market, Tether has been able to manage the redemption of customer assets, managing to redeem $7 billion in just 24 hours.
Currently, the Tether website says 79.62% of its reserves are backed by cash, cash equivalents, other short-term deposits, and commercial paper. The remaining reserve includes 8.36% worth of other investments including unspecified digital tokens, 6.77% in secured loans, and 5.25% in corporate bonds, funds, and precious metals.