New research suggests that cryptocurrency startup Tether — creator of dollar-pegged stablecoin USDT — has a banking relationship with Puerto Rican financial institution Noble Bank.
On Monday, BitMEX Research published a report examining newly-released data related to Puerto Rico’s financial system for the calendar year ended 2017.
This data — which was published by Puerto Rico’s Commissioner of Financial Institutions — indicated that bank deposits in the International Finance Entities (IFE) category exploded by 248 percent to $3.3 billion in the fourth quarter, while total assets in this category grew by 161 percent. As BitMEX noted, this surge in deposits correlated with the cryptocurrency market’s dramatic upswell, and Tether’s market cap grew by 215 percent during the same period.
Moreover, cash deposits as a percentage of total assets grew to 85.8 percent from 72.7 percent during the quarter, indicating a growth in full-reserve banking. Full-reserve banking is rare, and there are only two such banks in Puerto Rico that fall under the IFE category.
Of these two banks, only one — the San Juan-based Noble Bank — has verified relationships with cryptocurrency-related firms. In Fact, Noble Bank’s founder and CEO, John Betts, has a previous professional relationship with Tether co-founder Brock Pierce, stemming from a failed bid to take over now-defunct Bitcoin exchange Mt. Gox.
BitMEX Research had previously fingered Noble as a potential banking partner for Tether, and it said that the newly-released aggregate financial system data added further support to this thesis. However, the assets could just as easily belong to other cryptocurrency-related firms, as Puerto Rico has begun to attract these businesses en masse.
If Noble is serving as Tether’s primary reserve bank, it would be a significant development, as it would indicate that — at the very least — Tether is not a Ponzi scheme and that its assets are backed by USD.
As CCN has reported, Tether’s solvency has been a hotly-contested topic in industry circles over the past several months. Tether’s USDT token serves as a proxy for USD on many cryptocurrency exchanges, and critics have alleged that the token is not fully-backed by USD and is consequently being used to prop up the Bitcoin price.
Tether had contracted with an accounting firm to audit the firm’s balance sheet, but the two parties “dissolved” their relationship before the report could be completed and published.
The US Commodity Futures Trading Commission (CFTC) reportedly subpoenaed Tether — along with cryptocurrency exchange Bitfinex — in December, but it is not clear what the regulatory agency discovered as a result of the probe.
Tether did not immediately respond to a request for comment, while a Noble spokesperson declined to answer CCN’s inquiry, stating that “[a]s a matter of company policy, Noble doesn’t disclose client information.”