Consumer protection group criticizes Tether dollar reserve audit for lack of transparency

A new report from consumer advocacy group Consumers' Research has raised concerns about the stablecoin issuer Tether, specifically highlighting its lack of transparency regarding its US dollar reserves.

Published on 12 September, the report calls attention to Tether’s failure to produce a full audit of its reserves, despite previous commitments to do so. The group argues that the stablecoin issuer has yet to undergo a comprehensive audit by a reputable accounting firm, raising doubts about the legitimacy of its dollar reserves backing the USDT stablecoin.

Page 1 of Consumers’ Research letter to state governors. Source:Consumers’ Research

Comparison to FTX and Alameda Research Collapse

Consumers' Research drew parallels between Tether’s situation and the high-profile collapses of FTX and Alameda Research. In their report, the authors suggest that a similar lack of transparency contributed to those failures, warning that Tether’s lack of accountability could present similar risks.

To amplify their concerns, the group sent an open letter to every US state governor, alerting them to what they see as transparency issues with Tether. Additionally, the watchdog group launched radio campaigns and a dedicated website to explain their claims in detail.

A table of some of the allegations from Consumers’ Research. Source:Consumers’ Research

Allegations of Connections to Illicit Activity

One of the more serious accusations in the report is that Tether has engaged with questionable entities, allowing the USDT stablecoin to be used by actors seeking to evade international sanctions. The report concludes with claims that Tether is not doing enough to prevent its currency from being used for illicit purposes.

Related reading：Tether to Launch UAE Dirham-Backed Stablecoin, Expanding in the Middle East

Tether’s Response and Reassurances

Tether, however, has been making efforts to address transparency concerns. In January, Howard Lutnick, CEO of Cantor Fitzgerald, the firm managing Tether’s US securities portfolio, publicly defended the company. Lutnick stated, “From what we’ve seen, and we did a lot of work, they have the money they say they have.”

To further improve transparency, Tether hired Philip Gradwell, a former chief economist at Chainalysis, in July. Gradwell's role involves producing reports on how USDT is used, with plans to make these reports available to US regulators and investors, providing a clearer understanding of USDT’s usage patterns.

Recent Collaborations to Combat Financial Crime

Tether has also made strides in working with law enforcement to combat illicit activity. CEO Paolo Ardoino revealed in August that since 2014, the company has aided over 145 law enforcement agencies, helping recover $108.8 million in USDT connected to illegal activities.

In early September, Tether announced a collaboration with Tron, the largest blockchain network for USDT trading, to create the "T3 Financial Crime Unit." This unit aims to track and freeze illicit USDT transactions, further aligning Tether with efforts to combat financial crime.

Related reading：Considered the biggest scam in financial history, Tether and Bitfinex face market manipulation charges in amended class action lawsuit

Tether security and trust issues remain

While Tether has taken steps to improve transparency, its ongoing failure to provide a full audit of its reserves remains a significant concern. The accusations of facilitating illicit transactions and its limited public accountability may suggest that these efforts, while notable, are insufficient to address the deeper questions of trust and security that continue to surround the stablecoin issuer.