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Indirect use of Bahamian banks?
Tether, which issues the crypto asset (virtual currency) US dollar stablecoin “USDT”, seems to have transferred US dollar funds from the United States to the Bahamas via a signature bank. Bloomberg reported on May 5, citing sources familiar with the matter.
Tether instructs its customers to send US dollars to its partner bank, Capital Union Bank, based in the Bahamas, to pay for the stablecoin purchases through Signature Bank’s payment platform, Signet. It is said that
Alma Angotti, a former senior enforcement officer at the US Securities and Exchange Commission (SEC) and the US Treasury Department, said that “these transactions are not illegal,” speculating.
If the signature bank was aware of and approved such arrangements by Tether, it may mean that the bank had a high risk tolerance.
Signature Bank may have been aware of these schemes, but decided they were less risky than offering a savings account directly to Tether.
Signature Bank CEO Joseph J. DePaolo previously said that its “relationship with the cryptocurrency sector is limited to U.S. dollar deposits only” and does not offer other services such as “investment, trading, holding and custody.” was saying
Comment from Tether
Tether, on the other hand, commented that “every bank we used had access to multiple partner banks and counterparties.”
As I stated on 12th of March 2023, Tether didn’t have any direct or indirect exposure to Signature.
Good risk management where everyone failed…
— Paolo Ardoino 
(@paoloardoino) April 4, 2023
In addition, Tether’s Chief Technology Officer Paolo Ardoino said on the 5th, “As I said on March 12th, Tether has direct and indirect exposure to Signature Bank. I didn’t have it,” he said. He stresses that Tether has done a good job managing risk.
What is exposure
The amount, balance, and ratio of financial assets held by investors and institutions that are directly exposed to price fluctuation risk, counterparty risk, etc.
Cryptocurrency Glossary
U.S. Government Watching Ties to Banks
In the US, government agencies are calling attention to the links between banks and the cryptocurrency sector, especially after the FTX collapse.
Three U.S. regulators, including the U.S. Federal Reserve (Fed), announced in January that they would “closely monitor banks’ cryptocurrency-related exposures.”
“Risk of fraud and injustice by industry participants” “The magnitude of volatility (price fluctuations) in the virtual currency market” “When the stablecoin crashes, deposits of banks holding stablecoin reserves will flow out. Risk” etc.
connectionUS Fed and others warn of risks cryptocurrencies pose to banks
Regarding stablecoins, there are those with reserves such as USDT, and unsecured stablecoins that stabilize prices using algorithms. In the background of the FRB and others’ attention, the collapse of the unsecured former Terra (LUNA) ecosystem in May 2010 and the occurrence of Dipeg occurred.
Meanwhile, Tether regularly updates its reserve assets. It is removing commercial paper entirely and adding safer assets such as U.S. Treasury bonds.
connection: Tether Updates Reserve Assets, Cuts Secured Loans
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