Tether is controversial because it is a stablecoin, and stablecoins are a completely new type of payment instrument. Tether has $62 billion in circulation and is also the largest stablecoin. In addition, Tetрer has a bright and ambiguous past, including recently he was fined by the Attorney General of New York. It is reported that the company is also under investigation by the US Department of Justice on charges of lying to banks.
Since Tether was already under the microscope, the apparent lack of information on the Tether pie chart only caused new controversies. The next Tether pie chart will be published sometime this month. The company should think about improving the information content of the chart in order to dispel criticism.
Tether Pie Chart
This leads us to the well-known pie chart. After the Justice Department dug into Tether for several years, the New York Attorney General recently completed an investigation into the company, fining it $18.5 million. The Attorney General accused Tether of failing to inform clients of the true nature of its supporting assets, which at various points in time included very risky claims against third-party affiliates. In addition to the fine, Tether was required to publish a quarterly breakdown of its investments.
The date of the first disclosure of Tether information is May 13. That’s when the company published its infamous pie chart, shown at the top.
Anyone who has previously had access to public financial data would be concerned about the lack of information in Tether’s disclosure. Usually, the reporting institution that publishes a table or figure provides a list of explanatory footnotes at the bottom. Otherwise, the section of notes to the financial statements at the end of the financial document, which is always ten times longer than the reports themselves, will be more vivid.
Tether provided a tasteful color palette, but did not include any footnotes.
Thanks to the pie chart, we learned that Tether held 50% of its investments in the form of commercial securities, a short-term corporate debt instrument. About 9.96% is invested in corporate bonds and funds (some of them are in gold). Another 1.64% were encrypted as “other”.
Most financial institutions could give some idea of what types of commercial securities, corporate bonds and funds they hold. Have commercial securities and bonds been evaluated by a reputable rating agency? If so, what was the average credit rating? What are his bonds and when do they come? How investment-grade are they? What funds did Tether buy, and what are these funds invested in? What is “Other?”
Don’t get it wrong: people who own Tether have certainly benefited from the pie chart. After many years of not having any information, they finally got some data about what protects their contribution to Tether.
But the company’s tactics aimed at ensuring the lowest possible level of information disclosure had unpleasant consequences. After all, the purpose of information disclosure is to fill the information gap, to answer as many questions as possible. The pie chart only added more holes to the Tether story, creating an even longer string of questions.
The lack of data on the pie chart only harms Tether
During the 365-day period preceding the publication of the pie chart, Tether showed rapid growth. The number of Tether in circulation has grown from $8 billion to $58 billion. Since the creation of the pie chart, the growth trajectory of Tether has not changed much. Currently, there are 62 billion coins in circulation, which is only slightly higher than the level of $ 58 billion before the creation of the pie chart.
To make matters worse, Tether’s main competitor, USD Coin, outperformed it over the same period, almost doubling from $16 billion to more than $27 billion.
Circle, the issuer of USD Coin, usually provides more data to the public than Tether. Last month, it began providing monthly reports of investments in USD Coin in tabular form. It also includes useful explanatory footnotes at the bottom.
Tether has good reasons to improve its pie chart. The dynamics of the stablecoin competition can best be described as a race for the palm tree. In the long run, the trophies go to the safest and most transparent issuer.