Tether’s Audit Won’t Fix What’s Really Broken

After more than a decade of promises, Tether has finally engaged a Big Four accounting firm in KPMG for its first full independent financial audit, according to the Financial Times.  For a company managing $183 billion in stablecoin liabilities, effectively the world's largest dollar proxy outside the traditional banking system, this should be routine. Instead, it is being treated as a major milestone. That says a great deal about how little transparency the market has historically demanded from Tether.

For context, Circle's USDC received its first independent attestation back in 2018 and has been subject to full annual audits by Deloitte since fiscal year 2022. Tether, despite controlling roughly 60% of the stablecoin market for years, relied on quarterly attestations from BDO Italia. Those attestations confirmed reserve balances at a single point in time but did not meaningfully examine internal controls, accounting standards, or broader systemic risks. Even the audit itself raises questions given that KPMG is the same firm that signed off on Silicon Valley Bank, Signature Bank, and First Republic shortly before all three failed in 2023. PwC has reportedly been brought in to help prepare Tether's internal systems ahead of KPMG's review.

To Tether's credit, its reserve risks significantly differ from SVB's as the bank failed largely because it held long-duration bonds that lost significant value as interest rates rose, forcing losses when depositors demanded withdrawals. Tether's $141 billion in Treasury holdings are primarily short-duration T-bills, which are substantially more liquid and less exposed to interest rate risk. But Tether's 2026 Q1 disclosures also showed approximately $20 billion in physical gold and $7 billion in Bitcoin. Unlike Treasury bills, those assets are much more volatile and relatively illiquid.

The larger issue is that a once-a-year audit still provides only a limited snapshot. What institutions like Tether increasingly owes users is continuous reserve verification. Services such as Chainlink's Proof of Reserve offer live, on-chain confirmation of asset backing that updates continuously rather than quarterly. If Tether genuinely wants to demonstrate that its practices have changed, participation in systems like these would likely carry more credibility than an annual audit letter.

The reserve question may not even be Tether's most immediate challenge. In late April, Senators Elizabeth Warren and Ron Wyden sent letters to Commerce Secretary Howard Lutnick and Tether CEO Paolo Ardoino requesting information about a reported loan from Tether to "Dynasty Trust A," a trust benefiting Lutnick's four children. According to Bloomberg's reporting, the loan was registered in New York the day after Lutnick transferred his stake in Cantor Fitzgerald to his children to comply with federal ethics rules upon joining the Trump administration. At the same time, Cantor Fitzgerald reportedly custodies approximately 99% of Tether's Treasury holdings, while a 2024 convertible bond deal gave Cantor a 5% equity stake in Tether.

These overlapping relationships raise serious ethical concerns because Lutnick was also advising the administration on the GENIUS Act, the stablecoin legislation passed in July 2025 that established a federal framework for stablecoin issuers. Warren and Wyden argue that the overlap between custody arrangements, equity stakes, lending relationships, and family financial ties creates conflicts that are difficult to separate in practice. For a company whose USDT reportedly processes around $20 trillion in annual transaction volume and whose CEO has said Tether expects to become one of the top 10 largest US Treasury buyers in 2026, this concentration of political, custodial, and financial influence deserves closer scrutiny.

Record profits and a long-overdue audit are not, on their own, evidence of institutional trustworthiness. They are the beginning of a broader effort by Tether to secure legitimacy. Real legitimacy requires more than periodic attestations and a delayed Big Four engagement. It requires real-time reserve transparency, stronger independence from politically connected custodians, and the kind of structural accountability that competitors such as USDC have spent years trying to build. Until then, Tether's $8.23 billion reserve buffer remains less a symbol of strength than a reminder of how much depends on confidence in the system beneath it.

Daniel Lis is HODL's Chief Economist and Research Director. He has spent his career performing economic research that has been cited by the New York Times, Bloomberg, and the Wall Street Journal.