Bahamas-based lender, Deltec, known for offering banking services to stablecoin issuer Tether, revealed on Thursday about its investment of customers’ funds into Bitcoin.
The bank’s Chief Investment Officer, Hugo Rogers, announced its position in digital currency in the bank’s 2020 review video.
“It also includes a large position in bitcoin, which has received a lot of attention recently. We bought bitcoin for our clients at about $9,300, so that worked very well through 2020. And we expect it to work well in 2021 as the liquidity crisis continues to run hot,” Rogers said.
Deltec did not specify the name of the clients for which it is holding Bitcoin for, most importantly it is not clear if the stablecoin, Tether is indirectly backed by Bitcoin.
Another Controversy for Tether?
Tether is already riddled with controversies as it faced many allegations for the stablecoin not being fully backed by the US dollar. Further, the company did not conduct a third-party audit of its books.
According to Tether, its reserves “include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties.”
There is no mention of backing USDT with Bitcoin. In fact, any digital currency backing would destabilize the concept of a stablecoin. There is $24.3 billion USDT currently in circulation, meaning Tether must have that much of US dollar in its reserves.
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Tether’s business with Deltec was first publicly revealed in 2018. It is one of the two banks in which the stablecoin issuer is maintaining its reserves. However, Deltec has multiple cryptocurrency clients, as FTX’s Sam Bankman-Fried confirmed that his company is already using the Bahamas bank’s services.
We do in fact, and so can sometimes do the fiat leg over weekends, but can’t get money in/out of that bank over weekends in the first place
— SBF (@SBF_Alameda) January 13, 2021
Tether released a statement confirming that its deposits were not used to purchase Bitcoins.
“We are aware of recent statements by Deltec Bank & Trust Limited about the purchase of digital tokens for and on behalf of their customers. Tether does not outsource decisions about its reserves. Deltec does not purchase digital tokens for and on Tether’s behalf,” Stuart Hoegner, Tether’s general counsel, said.
Meanwhile, Tether and its sister company, Bitfinex are legally fighting the US prosecutors over allegations of almost a $900 million credit line that was issued to inappropriately conceal the losses conceived by the crypto exchange.