Haider Jamal

May 10, 2024

Deutsche Bank And Tether Go Back And Forth About Stablecoin Reliability

Tether has criticized Deutsche Bank for its recent report suggesting potential instability within the stablecoin market. The report, released on May 7th, highlights concerns over stablecoins, including the USDT stablecoin, facing a scenario similar to the 2022 collapse of TerraUSD (TUSD), which led to a significant market downturn of at least $40 billion over a short period.


Questioning Stablecoins

The analysis by Deutsche Bank, which is based on a study of 334 currency pegs spanning 223 years, indicates a high failure rate of fixed currencies, with 49% failing within an average lifespan of eight to ten years. Additionally, 42% of European consumers expressed doubts about the long-term viability of stablecoins in general.

The report concludes that many pegged assets in the cryptocurrency realm could encounter substantial turbulence due to speculative activities, potentially leading to de-pegging events. It raises concerns about the lack of transparency in stablecoin operations and their susceptibility to market sentiment. Deutsche analysts also criticized Tether for its opaque reserve practices, questioning its solvency status.


Tether Refutes The Claims

Unsurprisingly, Tether rebuffed the claims made in the report, saying they lack evidence and clarity. The firm emphasized the absence of concrete data supporting the forecasted decline of stablecoins and dismissed comparisons to TerraUSD, an algorithmic stablecoin.

Tether also countered Deutsche Bank by questioning the credibility of the institution itself, citing its history of fines and penalties. Despite ongoing scrutiny regarding the transparency of its reserves, Tether has released various financial attestations suggesting holdings exceeding $110 billion in fiat-denominated reserves. Critics argue that these attestations are not equivalent to a comprehensive financial audit.

In 2021, Tether settled with the New York Attorney General, paying an $18.5 million fine and facing restrictions in the state for allegedly misrepresenting the extent of its fiat collateral reserves. Despite the absence of an official audit, Cantor Fitzgerald CEO Howard Lutnick believes Tether possesses sufficient reserves.


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