Coin Bureau explains Tether's first real audit and what it means for crypto
Coin Bureau's Guy breaks down Tether's history of transparency issues and the significance of its first full independent audit by a Big Four accounting firm.
Summary
This Coin Bureau episode, presented by Guy, covers the full history of Tether's transparency problems — from its controversial reserve composition in 2021 through its legal settlements with the New York Attorney General and the CFTC — and explains why the announcement in March 2026 that KPMG will conduct Tether's first full independent audit is a landmark moment. Guy argues that the audit is driven by a combination of factors: Tether's ambition to register USDT under the GENIUS Act, its difficulty raising capital without audited financials, and intensifying competition from Circle's USDC. He also identifies which crypto assets — particularly the Plasma and Stable blockchains — could benefit most if the audit goes well, while noting the significant downside risk if it uncovers problems. External validation from Cantor Fitzgerald's Howard Lutnick — who publicly vouched for Tether's reserves before moving into politics — is also noted as a point of credibility.
Key Takeaways
FULL TRANSCRIPT
Tether's History of Transparency Concerns
Guy: For years, Tether has insisted that its USDT stablecoin is fully backed one-for-one by US dollar assets sitting safely in its reserves. The problem is, for most of its existence, Tether hasn't provided the kind of full independent audits you'd normally expect from a more traditional financial institution making similar claims. And as USDT's market cap has continued to grow, the FUD has grown with it. But the biggest criticism of all has been transparency.
Despite Tether promising a comprehensive audit since 2017, we've yet to see one. Instead, what we've seen are so-called attestations, which aren't the same as audits — but more on that later.
When Tether released its first attestation in March 2021, it didn't exactly calm nerves. That's because it revealed that only a portion of USDT's reserves were actually held in cash. Around 75% of those reserves sat in cash equivalents, short-term deposits, and risky commercial paper, with commercial paper alone making up a whopping 65% of the total. The remainder consisted of 12% in secured loans, 10% in corporate bonds, funds, and precious metals, and a smaller amount under other investments, which included digital assets — aka crypto.
The reason this attestation didn't calm nerves was because it raised questions about whether these assets could be sold in size to honor USDT redemptions. In other words, if everyone tried to redeem their USDT all at once, would Tether really be able to convert all those assets into dollars quickly and without any losses?
S&P Downgrade and Structural Concerns
Even though Tether subsequently improved the composition of USDT's reserves, these concerns haven't fully gone away. For example, in late 2025, S&P Global downgraded its internal assessment of Tether's stability to "weak" — the lowest possible rating — citing a growing share of higher-risk assets in its reserves, including Bitcoin, gold, corporate bonds, and loans.
There's also the issue of transparency around Tether's corporate structure. Tether Limited is registered in places like the British Virgin Islands, which have lighter disclosure requirements. On top of that, Tether's leadership has historically kept a low public profile compared to executives at traditional financial institutions, which some critics view as opaque behavior.
Tether's Relationship with Bitfinex
There's also Tether's relationship with the Bitfinex crypto exchange. Both companies are owned by several of the same executives — Tether's CEO Paolo Ardoino also serves as Bitfinex's CTO. Critics argue that this creates potential conflicts of interest, particularly around USDT issuance, reserve management, and trading activity.
More importantly, these concerns have historically resulted in allegations that USDT was used to influence crypto prices. Several academic studies have claimed that large spikes in USDT issuance coincided with market rallies, implying possible price support. Tether has denied these claims, but the suspicion has lingered, and there have even been legal cases.
Legal History: The New York Attorney General and the CFTC
The most significant case came from the New York Attorney General. In 2019, the NYAG accused Tether of using its reserves to allegedly cover an $850 million shortfall at Bitfinex after funds held by its bank became inaccessible. The case alleged that Tether misrepresented how USDT was backed and obscured transfers between related companies. It wasn't until 2021 that Tether and Bitfinex settled the case for $18.5 million. Notably, Tether and Bitfinex stopped servicing customers in New York as part of that settlement.
The most significant aspect of the settlement, though, was that it also forced Tether to publish quarterly reserve disclosures. This was a major turning point for transparency, although critics argue it didn't go far enough.
Tether's legal dramas didn't stop there. The company also faced action from the Commodity Futures Trading Commission, or CFTC. In 2021, the CFTC fined Tether $41 million for misleading statements about USDT's backing, alleging that it wasn't fully backed by cash at various points between 2016 and 2019. Bitfinex was also fined for operating illegal commodity transactions.
To be clear, none of this means that Tether has engaged in fraudulent activity. However, it does explain why USDT remains one of the most controversial and hotly debated assets in crypto to this day.
Attestations vs. Audits: What's the Difference?
After Tether's 2021 settlement with the NYAG, it began producing quarterly assurance opinions — also known as attestations — prepared by independent accounting firms. These are not the same as audits. Attestations are not as thorough as audits, which require really digging into the documentation to assess things like risk, rather than simply reviewing documents.
For instance, in August 2021, Tether disclosed that around half of its reserves were held in risky commercial paper and certificates of deposit. While these are short-term debt instruments, they carry higher credit risk than cash or government bonds. This resulted in lots of questions about the quality of these debts and their duration. To its credit, Tether also began publishing details on credit ratings and maturity profiles around the same time — an improvement from being almost totally opaque in earlier years. This is the kind of deeper information that an actual audit would disclose.
How Tether's Attestations Have Evolved
Fast forward to today, and Tether's attestations are closer to being audits in this sense. Rather than vague claims about being fully backed, attestations now provide full breakdowns of the different asset classes backing USDT.
Take the most recent one, for example. As of December 31, 2025, it showed nearly $193 billion in total reserves. About 63% was in US Treasury bills, 10% in overnight reverse repo, nearly 3% in term reverse repo, 9% in precious metals — mainly gold — nearly 9% in secured loans, over 4% in Bitcoin, and 1.4% in other investments.
As you may have noticed, the recent attestation doesn't show reserves in commercial paper or certificates of deposit. That's because in early 2022, Tether began aggressively cutting its high-risk commercial paper exposure. By mid-2022, that exposure had fallen to near zero — hence the earlier comment about the composition of USDT's reserves improving in recent years.
Most of Tether's reserves now sit in US Treasury bills. Treasury bills are among the most liquid and low-risk investments available. As such, Tether has directly addressed one of its critics' biggest concerns: whether USDT could withstand a large-scale redemption event. Given the current composition of its reserves, the answer is clearly yes.
Another quiet but important change is that these attestations now include far more than simple reserve snapshots. In recent years, Tether has started adding quarterly financial results, including net profits and equity figures. While this doesn't count as a full audit, it's certainly a big leap forward in that direction. These additional metrics give investors a clear view into how Tether's business is performing, how profitable its reserve strategy is, and how much capital buffer exists beyond its liabilities.
Since late 2022, Tether has engaged BDO Advisory Services — a leading independent public accounting firm — to provide ongoing quarterly attestation reports. These attestations have consistently affirmed that USDT is fully backed, and over time they have expanded to include broader financial information. In early 2024, for example, Tether began reporting group-level profits and equity alongside reserve data. This added another layer of transparency that wasn't legally required, but was clearly aimed at improving the company's credibility.
Most importantly, these attestations revealed that Tether's reserves now far exceed its liabilities. In plain English, Tether has more assets to back USDT than is technically required.
External Affirmations and Cantor Fitzgerald
There have also been external affirmations of USDT's robustness from reputable financial institutions, most notably Cantor Fitzgerald. Cantor's former CEO Howard Lutnick has repeatedly declared that Tether holds the assets it says it does to back USDT. And well, he's a politician now, so we can definitely trust him.
Why Tether's Big Four Audit Is a Landmark Moment
Regardless, despite everything Tether has done, critics remain. And the bigger that USDT gets, the louder these critics become. After all, attestations are not audits. Consumer watchdogs and rating agencies have continued to push for a full independent audit conducted under international standards. This is why Tether's latest announcement is such big news.
In March 2026, Tether announced that it had hired a Big Four accounting firm to conduct its first full independent audit of USDT's reserves. The so-called Big Four accounting firms are Deloitte, PricewaterhouseCoopers, Ernst & Young, and KPMG. At first, Tether didn't reveal which of the Big Four it had engaged. However, it was later revealed that KPMG would be Tether's first auditor, with PricewaterhouseCoopers brought in to prepare its internal systems for further audits.
This audit, once it occurs, will mark the most significant transparency milestone in Tether's history and should silence USDT's critics once and for all.
Why Has It Taken So Long?
But this begs the question: why has it taken Tether so long to complete a full independent audit? After all, it's been promising to do one since at least 2017. Why did it take until now to pull the trigger?
The short answer is the sheer scale and complexity of Tether's operations. USDT's reserves include cash, treasuries, repo agreements, corporate bonds, precious metals, secured loans, and even digital assets. Not only is this a diverse set of assets, but many are also held in offshore jurisdictions or non-traditional formats, making a full audit inherently difficult.
On the other side of the balance sheet are Tether's liabilities — the global supply of USDT. These liabilities aren't static, as USDT supply is constantly changing. Auditing tokenized liabilities at this scale across multiple custodians and banking partners worldwide is a task that's largely unprecedented.
And if that wasn't already complicated enough, Tether has a long and complex history which could involve counterparties that either no longer exist or are unable to provide the documentation Tether requires. That's why, from an auditor's perspective, Tether has always been a high-risk client. Auditing the world's largest stablecoin issuer puts a Big Four firm under intense scrutiny, especially now that Tether has become so powerful. Just one controversial finding could spark market instability or legal fallout, and nobody wants that.
Why Now?
So why now? Why, after all these years, is Tether suddenly seeking a full audit?
Tether has actually been pursuing this for quite some time. In March 2025, the company hired a new Chief Financial Officer, Simon McWillis, to help make this a reality. Twelve months later, it looks like those efforts have paid off.
Tether's move to a full audit comes as the company plans to register USDT under the GENIUS Act, which is also something they've been chasing for a while. In July last year, CEO Paolo Ardoino said: "We'll be working very, very hard to make sure we comply with the foreign issuer pathway within the GENIUS Act. It's crazy that sometimes people think Tether will not comply."
In fact, Tether is so determined to comply that it even launched another stablecoin — USDT0-based on the Stable blockchain — in January this year, as a sort of backup or test run. That stablecoin's reserves are fully compliant with the GENIUS Act, allowing it to meet the needs of institutions until USDT itself is fully registered.
There's also the fact that Tether has apparently been struggling to raise capital. Back in December 2025, the company floated the idea of a $20 billion raise at a $500 billion valuation, which would make it one of the most valuable private companies in the world. But by February this year, those plans were scaled back after investors showed hesitation, with some advisers suggesting the company should raise just $5 billion instead. It stands to reason that the absence of an audit was probably part of why investors were hesitant to allocate.
And obviously there's also competition from other stablecoins, notably Circle's USDC. Although USDT's market cap is about six times higher than USDC's at the time of filming, competition between the two stablecoins has been heating up. USDC actually overtook USDT by year-to-date transaction volumes in March this year — the first time that has happened since 2019.
Whatever the case, the key takeaway is that Tether's plans to audit its reserves only make USDT more attractive. In order for USDT to maintain its market dominance and for Tether to increase its legitimacy, it needs a Big Four audit.
Impact on the Broader Stablecoin Market
So we know Tether's audit is a big deal for the company, but what sort of impact could it have on the broader stablecoin market?
The most obvious answer is that it will raise the competitive bar for other stablecoins, with Circle's USDC being the main standout. USDC has long benefited from having clearer disclosures. As a publicly traded company, Circle already undergoes annual audits by another Big Four firm — Deloitte — and also issues monthly attestations. As a result, USDC is widely considered to be more institution-friendly, giving it a competitive edge. Given this, Tether's full audit is arguably bearish for Circle.
And this dynamic is already playing out. Tether's announcement that it plans to register USDT under the GENIUS Act caused Circle's stock, CRCL, to plummet almost 20% in a single day — the sharpest drop in the stock's history. What's ironic is that the drop was seemingly made worse by the GENIUS Act itself. A leaked draft revealed proposals to ban interest-like returns on stablecoins entirely, though staking, loyalty programs, and liquidity provision would still be allowed.
Some analysts have also speculated that Tether's audit plans are a signal that the company is looking to go public, much like Circle did with its CRCL stock. This might not just be speculation. According to a December 2025 article by Bloomberg, Tether's executives were apparently considering tokenizing the company's stock after the aforementioned planned $20 billion raise. Whether this actually happens remains to be seen, but it does seem likely.
Needless to say, this would be even more bearish for Circle, because Tether is much larger and also doesn't share profits on its reserves with another company — Circle shares these profits with Coinbase.
On the other hand, Tether's audit could in fact help Circle gain more traction, both with USDC and with its CRCL stock, simply because it would raise investor confidence in the transparency of reserve assets backing stablecoins more broadly. Of course, while Tether would naturally be the biggest beneficiary, the sheer fact that the audit would improve the stablecoin market's image would likely attract new investors — and not all of them would immediately go to Tether.
Ultimately, the most notable change is likely to be the market share each stablecoin holds. Assuming USDT's audit goes well, USDC will effectively lose its "safer" edge. If that happens, institutions could either start using USDT instead, or could rotate their funds out of USDC and into USDT, if only to diversify.
However, this assumes the audit goes well. There's also the risk that it uncovers some ugly truths — such as a shortfall of highly illiquid assets or a heavy reliance on volatile assets like Bitcoin or other cryptocurrencies. To be blunt, if the audit finds even the slightest problem, then there is a possibility that Tether's strategy here could backfire. In that scenario, the inverse effect would likely happen: institutional capital would quickly rotate out of USDT and into USDC, massively boosting Circle's share of the stablecoin market.
Which Cryptos Could Benefit?
And this brings us to the question of which other cryptos could benefit. After all, USDT isn't exactly going to pump to $10 anytime soon. Thankfully, there are two other projects that Tether runs that could actually benefit from an increase in USDT's usage.
The first is a Layer 1 blockchain called Plasma, which is purpose-built for stablecoins — with USDT obviously being the main focus. It's backed by Tether and Bitfinex, as well as prominent VCs like Peter Thiel. The Plasma blockchain features zero-fee USDT transfers, EVM compatibility, near-instant transaction finality, and institutional-grade security. It also offers the ability to shield transactions in a regulatory-compliant way. More importantly, the supply of USDT on Plasma has been growing exponentially. This could make Plasma a very attractive option for institutional investors looking to get exposure to Tether if the audit goes well. Put simply, XPL could be the best proxy for Tether stock, at least while the company remains private.
The second blockchain created by Tether is also purpose-built for USDT transactions. It's called Stable, and has a native token called Stable, which uses the ticker STBL. The Stable blockchain uses a special variant of USDT called USDT0 as the protocol's native gas token and aims to be the fastest and most reliable way to transact in USDT. The protocol features low fees, EVM compatibility, and will eventually be able to process over 200,000 transactions per second with sub-second finality. And just like Plasma, Stable also offers regulatory-compliant shielded transactions. The catch, though, is that the supply of USDT on Stable hasn't grown as much as on Plasma, so Stable may not do as well long term.
Tron, Ethereum, and Other Chains
Besides these two Tether-connected cryptos, Tron and Ethereum could also benefit because most of USDT's supply currently exists on these chains. Specifically, just under 46% of USDT supply exists on the Tron network, while 43% exists on Ethereum. Naturally, this means that both Tron's TRX and Ethereum's ETH could rally if Tether's audit goes well and USDT's usage and supply increase.
Any chain that has lots of USDT could enjoy some of the benefits of USDT's adoption growth. These include the BNB Smart Chain, Solana, Arbitrum, Polygon, Aptos, and many more. That said, all of these have less than 5% of USDT's market share and roughly the same share of the DeFi ecosystem. So it may be worth focusing on the insider cryptos and the current leaders if you're looking to bet on Tether and USDT's growth — not financial advice, of course.