Allegations against financial services institution Deltec and stablecoin issuer Tether, one of Deltec’s customers, spread rapidly this week as a story first published by CoinDesk implied that Deltec had used Tether’s funds to buy bitcoin.

The article in question refers to a recently published year-in-review video by Deltec, in which its CIO Hugo Rogers discusses the firm’s investment activities throughout 2020, as well as its outlook for 2021.

CoinDesk linked to a tweet that commented on Deltec’s video, “7:20 in the video Deltecbank has a "large" position in bitcoin, but Tether absolutely has nothing to do with it, right?”

The tweet was published by a Twitter user that appears to be impersonating Hugo Rogers, using a photo of Rogers as their profile picture, and Deltec’s office address and website in their profile description.

During Deltec’s video, Rogers discloses that Deltec indeed holds a “large position in Bitcoin,” having bought bitcoin for its clients “at around $9,300.”

Rogers mentions Bitcoin alongside a list of other investments by Deltec and makes no reference of Tether at any point in the video. 

Still, the CoinDesk article reads that Roger’s statement “may raise new questions about whether the dollar-pegged USDT stablecoin [...] is actually backed in any way by bitcoin.”

The assumption, which appears to build on the aforementioned tweet, is that there is reason to believe Deltec’s bitcoin purchase was conducted with funds the firm holds on behalf of Tether. CoinDesk delivers no evidence, nor any plausible basis for this assumption.

The allegations were met with surprise by a number of industry executives.

Deltec Has More Than One Customer

Deltec Bank is one of a number of subdivisions under an umbrella called Deltec Group, which includes, among other services, private and corporate banking, wealth management, investment management, and family office services.

In 2020, Deltec launched a Bitcoin structured product for clients who are looking to gain exposure to Bitcoin; a spokesperson for Deltec shared with the BTC Times that in light of the global recession that was triggered by COVID-19, the firm “determined that owning digital assets was an opportunity to diversify stores of value in a world where fiat currency is being printed with abandon.”

The article published by CoinDesk implies that Deltec may have used funds it holds for Tether to buy bitcoin. No publicly available information points to this being the case, making the assumption seem far-fetched and baseless.

While Tether may be Deltec’s most high-profile customer, it is not its only customer. It may well be possible that other clients serviced by Deltec are interested in Bitcoin, especially given Bitcoin’s recent price development and accelerated adoption by institutional investors worldwide.

Who instructs Deltec to buy bitcoin for them is not known, however, as banks do not usually make this type of information publicly available, for confidentiality reasons. A spokesperson told the BTC Times that “at no point would Deltec disclose details of specific client accounts/portfolios without consent, and such accusations are unsupported and purely speculative.”

Important Context Was Added to the Story—But Too Late

The original article by CoinDesk has been edited multiple times since its publication to include comments from Deltec and Tether representatives.

A comment added by Tether General Counsel Stuart Hoegner stated that “Tether does not outsource decisions about its reserves,” and that “Deltec does not purchase digital tokens for and on Tether’s behalf.”

An attorney for Deltec responded as well, commenting that “Mr. Hugo’s statement in the video regarding the investment strategies for some clients had no relation whatsoever to Tether’s depositary assets with Deltec and, in fact, made no reference to Tether at all.”

The added comments from the involved parties paint a very different picture from the initial allegations laid out in the article. When the comments were included, the article had already been circulating for almost a day.

In fact, not only does the assumption that Deltec buying bitcoin means it must have done so using Tether’s funds lack substance, it also falls short on logic. As Blockstream CEO Dr. Adam Back pointed out in a tweet on Friday, “Tether is a crypto company. They wouldn't go to Deltec, a bank, to buy crypto.”

The question of whether USDt is fully backed has received increased attention recently, amid requests for more transparency surrounding Tether’s reserves.

In a recent podcast appearance on Peter McCormack’s What Bitcoin Did, Hoegner stated that “every Tether is 100 percent backed by our reserves.” Those reserves, according to Hoegner, “include traditional currency and cash equivalents, and may include other assets and receivables from loans made by Tether to third parties.”

Earlier this week, Tether CTO Paolo Ardoino shared on Twitter that the firm is working towards “increased transparency” in 2021, which may refer to the reserves backing USDt.

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