Tether’s CEO just told us why the Big Four won’t audit reserves backing $108bn stablecoin

Ever since Tether came to dominate the stablecoin market, the issuer has been bedevilled by a big question — why doesn’t the company produce audits of its reserves?

Now CEO Paolo Ardoino has provided an answer.

In an interview with DL News, he said the Big Four accounting firms — Deloitte, PwC, EY, and KPMG — are afraid to work with Tether because they fear it will damage their reputations.

“None of the Big Four companies will audit us,” Ardoino said. But he said securing one of them as Tether’s auditor is a “top priority.”

USDT’s utility

An audit by one of those global firms would calm the perennial jitters investors have about the issuer of USDT, the world’s top stablecoin with a $108 billion market value.

Tether has become an indispensable cog in the machinery of the crypto market. It enables users to move between fiat currencies and digital assets.

Across every major cryptocurrency exchange, USDT is the most traded cryptocurrency against Bitcoin, Ethereum, and Solana.

That means that when speculators buy or sell more of their digital assets for dollars, they’re usually doing it in Tether’s USDT.

This is why it’s so important for Tether to show that it has the cash to back up USDT every quarter.

But between the FTX disaster and the hacks, heists, and regulatory crackdowns in crypto, it hasn’t been easy to sign on as a client for one of those top accounting outfits.

Why risk it?

“So you are a Big Four auditing firm, and you have the entire banking industry that is your customer,” Ardoino said. “Why would you risk 100,000 customers for a couple of stablecoins?”

It didn’t help when Circle, Tether’s archrival, got swept up in the failure of Silicon Valley Bank in 2023. Circle held $3.3 billion in deposits at the lender. As Circle’s own customers bailed out of its stablecoin, USDC briefly slipped its dollar peg.

Senator Elizabeth Warren, the Democratic lawmaker from Massachusetts and staunch crypto critic, decried “sham audits” of crypto firms.

“You can see how certain parts of the US Congress is against crypto,” Ardoino said.

Media representatives for the Big Four accounting firms did not immediately respond to DL News’ requests for comments.

A top priority

Ardoino added that stablecoin providers like Tether and Circle probably wouldn’t be as lucrative a client as traditional financial firms because blockchain-recorded assets makes them easier to audit.

Still, Ardoino insists he wants an upgrade from the quarterly attestations prepared by a firm called BDO Italia.

“We are trying to make the case,” he said. “We’re trying to build relationships to get the audit from a Big Four firm”

Attestations vs audits

From 2014 to 2017, Tether did not publish reports on reserves. Since 2022, Tether has relied on quarterly attestations.

The difference between an attestation and an audit is subtle but important.

An audit asks a firm to conduct an independent analysis of a business and its practices. An accounting firm may discover risks unknown to the business in question, and an audit may also reveal compliance issues at the business.

An attestation means the business in question — in this case, Tether — provides the accounting firm with documentation and the scope of the accounting firm’s financial review.

Regarding BDO Italia’s latest attestation, for example, the firm writes that its analysis is limited to the fourth quarter.

This minor accounting distinction has become major as the stablecoin has grown in importance and value over the past decade.

Tether takes flight

For a market as volatile as crypto, stablecoins are a life raft for investors looking for stability. That’s because stablecoins are cryptocurrencies pegged to the price of fiat currencies, like the US dollar or the euro.

There are several flavours of stablecoins on the market, but Tether uses a reserves model. It claims that for every USDT in circulation, the firm holds an equivalent real-world dollar.

According to the latest attestation in December, Tether held $80 billion in US Treasury bonds in its reserves, along with cash, Bitcoin, and gold.

Liam Kelly is DL News’ Berlin correspondent. Contact him at liam@dlnews.com.