CoinShares reduces concerns over Tether collapse after Arthur Hayes warning

James Butterfill, head of research at CoinShares, dismissed concerns about Tether defaulting following warnings from BitMEX founder Arthur Hayes and his assertion that Tether’s value would decline. Bitcoin Gold by 30% could significantly weaken the value of parallel assets held by the stablecoin issuer.

In a market report update dated December 5, Butterville confirmed that Tether maintains parallel reserves worth over $181 billion against liabilities worth approximately $174.45 billion, leaving it with a surplus of approximately $6.78 billion.

The rebuttal of these concerns comes as crypto markets face disruption from fluctuations in Japanese government bonds and weak U.S. employment data, which showed a decline of 32,000 jobs compared to expectations of just over 10,000 jobs.

Hayes reportedly sparked a heated debate on November 30 when he argued that Tether “You risk huge investments linked to interest rates“ Its exposure to risks if the Federal Reserve lowers interest rates, in addition to investment risks associated with its $22.8 billion investment in gold and Bitcoin if exposed to fluctuations.

Tether CEO responds to crash risk claims with financial data

Tether CEO Paolo Ardoino was quick to refute Hayes’ assessment by revealing that the Tether parallel group’s total assets were around $215 billion.

The CEO explained that the company maintains a surplus of approximately $7 billion in Treasuries overflowing reserves alongside the supply of its stablecoin Tether (Tether-USDT), in addition to an additional $23 billion in retained earnings as part of the Treasuries held by Tether.

It is worth noting that Bitcoin balances and gold reserves constitute only 12.6% of total reserves, while the company holds more than 70% of its reserves in short-term US Treasuries.

Arduino said: “Standard & Poor’s (S&P) made the same mistake by not accounting for additional Treasury bonds or their monthly principal interest, which generates approximately $500 million.” Alone,” emphasizing that critics “Either weak in math or motivated to support our competitors.”.

Historically, the company has achieved profitability this year with over $10 billion worth of interest on parallel reserve assets, making it one of the most efficient companies at generating cash flow gains with just 150 employees.

It is worth noting that its defense came after S&P Global downgraded the rating on the price stability of Tether (Tether-USDT) to the value of the US dollar from 4 to 5 on November 26, indicating an increase in the company’s exposure to the assets. “High risk” And a continued existence “Disclosure gaps”.

Arduino responded defiantly by saying: “We wear with pride the garment of your hatred. » Confirm that the Tether company is “The first companies with a surplus on their parallel assets and the strongest financial solvency in the financial sector, without high-risk reserves.”.

The rating drop has strong implications under the EU’s Digital Asset Markets Act (MiCA), which prohibits Tether from trading on EU trading platforms if its rating reaches 5, which could lead to a diversion of institutional liquidity to rival companies such as Circle, the issuer of USD Coin-USDC.

Industry Experts Question Hayes’ Fundamental Analysis

Joseph Ayoub, former head of digital assets research at Citi, noted that Hayes overlooked crucial differences between Tether’s reported reserves and its total institutional holdings.

The analyst explained that the company maintains a separate balance sheet for securities that include mining activities and parallel reserves, which are not publicly disclosed under “Compliance Philosophy“What the company adopts to disclose these reserves.

Ayoub went on to say: “Tether is not about to collapse, quite the contrary; it has a machine to print money.”indicating that it holds about $120 billion in yield-generating Treasury bonds, which generate gains of about 4% since 2023.

It is worth noting that banks operate with significantly lower partial liquidity reserves at rates between 5% and 15% compared to Tether’s excess collateral structure, while traditional institutions benefit from central bank support as a last resort for lending, something the company lacks.

For his part, Hunter Horsley, CEO of Bitwise Invest, described Tether’s reserve structure as “Better than banks’ fractional reserves”While Ki Young Ju, CEO of CryptoQuant, dismissed Hayes’ warning, believing that it stemmed from the interests of running his own malls and was not based on objective reasons.

Additionally, Izabella Kaminska, former editor-in-chief of FT Alphaville, provided further structural analysis, showing that the strength of Tether’s parallel treasury asset layer and retained profitability model offer… “A capital structure very similar to the banking model advocated by academic researcher Anat Admati, which consists of layers of parallel assets that are stronger than bonds, with much lower financial risks and highly variable maturities.”.“

Kaminska also pointed out that if Tether’s depositor base proves its willingness to recover its funds directly using gold reserves during stress waves, the precious metal will become… “A natural asset to provide financing resources in emergency situations due to undisclosed or uncertain risks to the business, and as an alternative to tangible assets that provide support similar to that which the central bank provides to banks as the ultimate lender.”.

It is worth noting that international stimulus channels operate without relying on competing regulatory frameworks, and this controversy comes at a time when Tether is expanding beyond the issuance of stablecoins and moving into lending activities related to commodity trading, as it has provided loan guarantees worth approximately $1.5 billion in the oil, cotton, wheat and agricultural commodity markets.

Finally, the company’s parallel reserve audit report for the third quarter shows that Tether’s supply increased by more than $17 billion during this quarter, which brought its circulating supply at the end to more than 174 billion Tether, and October data also showed that its circulating supply exceeded 183 billion USDT.

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