After a CNBC interview with the train wreck and the regulators’ patience with the digital currency sector’s reluctance to lose supervision, the jig for the tether stablecoin could be ready.
On Wednesday, Tether’s CTO Paolo Ardoino and General Counsel Stuart Hoegner appeared on CNBC’s online program TechCheck, where presenter Dierdre Bosa asked the couple about the lack of transparency in the digital currency’s largest stablecoin and the company’s “Where’s Waldo” tendencies spearheaded CEO Jean-Louis van der Velde and CFO Giancarlo Devasini.
Ardoino and Hoegner’s participation was confirmed by Bosa less than 24 hours before the show, which may have been responsible for the meager audience that watched the livestream. The fact that Ardoino and Hoegner took part at all is remarkable in itself, because the two usually prefer to give interviews only for confusing vloggers with dozens of viewers.
Regardless, the 30-minute segment could ultimately lead to a new acronym, FABNAQ (asked frequently but never answered), as Bosa’s more in-depth questions were routinely fended off by a mix of obfuscation, confusion, and the occasional uncomfortable scream of Ardoino, ‘Search! A yeti! ‘ before he cuts his video feed long enough to wipe his flop sweat off.
Hoegner, who often seemed to read prepared cheat sheets – or perhaps checked that Ardoino did not have heart disease – rejected Van der Velde and Devasini’s absence by stating that the big cheeses were busy dealing with “the people who matter” to speak. In any case, the B-Team had the following to say to us peons.
Test? Strange that …
The main takeaway from the interview was Hoegner’s assertion that an audit – not just another weak quarterly confirmation from a Cayman Islands stamp company – was in the works of Tether’s true financial position, with the closing time in “months, not years” be measured. For the record, Tether has been promising a decent audit for four years now – about 48 months in Hoegner parlance – so we’ll believe it when we see it.
Bosa noted that Tether had previously appointed US-based Friedman LLP as the auditor before that relationship was “broken” in January 2018 due to Tether’s dissatisfaction with Friedman’s “excruciatingly detailed procedures.” When asked why Tether did not choose a well-known US name this time, Hoegner said that Tether was not convinced that “the trust is inevitably based in one country or another”.
Hoegner claimed that Tether executives were “leaders in transparency,” despite the prevailing view that the only thing Tether and transparency have in common is the letter “t”. When asked why there was this public “separation”, Hoegner pleaded ignorance, adding that USDT’s popularity was sufficient evidence of the market’s confidence in Tether’s business.
Recall that New York AG’s investigation of Tether found that the company had a habit of checking cash on the bank the day before an accountant asked to “borrow” nine-digit amounts from sister company Bitfinex Tether bank accounts the issued value of. corresponds to USDT. The day after this review, Tether would transfer the sum back to the Bitfinex exchange and resume the shell game. We suppose you could argue that this was obviously dishonest, so we reluctantly admit Högner.
Much of Bosa’s polls focused on the assets backing the nearly $ 62 billion USDT in circulation, about two-thirds of which were minted this year. After Hoegner had previously claimed that every USDT had a matching US dollar somewhere, Hoegner now claimed that every USDT was covered “one to one with our reserves,” which is a horse of an entirely different color.
The release of two pie charts by Tether in May – the lowest minimum for comparing the company to the New York attorney general for 18.5 million of unknown origin.
The widespread suspicion that much of Tether’s commercial paper was issued by dubious Chinese firms rose after Chinese regulators reportedly imposed new transparency requirements on commercial paper issuers. When asked by Bosa how much exposure Tether had to Chinese commercial paper, Hoegner said only that Tether’s portfolio “contains international commercial paper”.
Hoegner further claimed that the majority of Tether’s commercial paper was rated “A2 or better…” by several rating agencies. However, when he pushed for the Chinese component, Hoeger claimed, “we protect our counterparty relationships with great discretion”.
Ardoino also circumvented Bosa’s pursuit of detail by saying it was “very important to respect the privacy of the banking partners we work with”. This contradicts traditional money market funds, which generally publish detailed breakdowns of their holdings, and also blows Titanic-sized holes in Tether’s mantra of the “leader in transparency.”
Tether liquidity not quite as wet
Hoegner claimed his company “never refused redemption from a Tether customer,” but Tether’s terms and conditions only allow redemption to a “verified customer,” also known as an exchanges and OTC trader. End users need to find a willing buyer on an exchange to convert USDT into anything usable in the real world. In addition, Tether reserves the right to delay withdrawals or redemptions depending on the “inliquidity or unavailability or loss” of any of Tether’s gaps in its reserves.
With that in mind, Hoegner’s attempt to reassure viewers about these reserves went a little wrong when he claimed Tether had enough cash on hand to cover “our largest 24-hour redemption period.” Hoegner didn’t seem at all aware that bragging about a day’s liquidity might not be the best selling point for a financial institution with a market cap of $ 62 billion.
You can’t spell security without ‘SEC’
While the general reaction to the Tether Brothers’ appearance on CNBC has been comedic disbelief, more serious challenges seem to arise after the speech by Gary Gensler, the newly appointed chairman of the Securities and Exchange Commission (SEC).
Gensler warned providers of digital currency products, including all “stable value tokens backed by securities,” that failure to comply with securities laws or refusal to work with securities regulators will not end well. Gensler warned that the SEC would “use all the tools in our enforcement toolkit” to ensure compliance – real compliance, not Binance’s “We’re on a journey” philosophy – is imminent.
With Tether’s confirmations that its reserves consist mostly of commercial paper and corporate bonds, USDT appears to be the very definition of a tokenized security. Therefore, the SEC will likely soon invite Ardoino and Hoegner to conduct their own interview. Perhaps the Tether CEO and CFO will even attend this event, provided the SEC chairman is someone who matters.
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