Tether Faces Scrutiny Amid Delistings, Minting Concerns

Tether, the largest stablecoin by market share, has recently faced scrutiny and concerns about its stability. A social media post from Chain Mind suggested that USDT could potentially crash to zero, comparing it to the 2022 collapse of TerraUSD (UST), which lost its $1 peg due to insufficient reserves. The primary reasons cited for this potential crash include Tether's alleged lack of audits, delistings on European exchanges, and the minting of new tokens.

Tether has been under fire for its lack of independent audits, despite claiming that its reserves are fully backed. In 2021, the New York Attorney General concluded that Tether had misrepresented its reserves, resulting in an $18.5 million penalty and an agreement to periodic attestations. However, these attestations have not been conducted by independent forensic auditors. Tether's Q1 2025 report claims $115 billion in Treasuries plus $5.6 billion in excess reserves, but no certified auditor has verified this line-by-line.

The minting of new tokens has also raised eyebrows. Tether frequently mints large batches of USDT, which are marked as authorized but not issued. This month, Tether minted $2 billion in new USDT on TRON. While Tether claims this is routine inventory management, skeptics view it as a potential preparation for redemption waves, where many investors quickly pull their money out of a fund, causing a large outflow.

Tether's refusal to comply with the Markets in Crypto-Assets Regulation (MiCA) in Europe has led to delistings on major exchanges such as Binance and Kraken. MiCA requires stablecoins to hold 60% of reserves in EU-regulated banks, a condition that Tether has not met. This has resulted in a loss of market access for USDT in Europe, further fueling concerns about its stability.

Despite these concerns, the analysis suggests that Tether is unlikely to collapse immediately. The main triggers for a potential collapse would be legal action forcing reserve freezes, loss of banking partners, proof that reserves are partly unbacked, and social contagion. Tether remains the dominant stablecoin, holding 62% of all stablecoin volume and serving as the primary settlement layer on most centralized exchanges and decentralized finance protocols.