Tether has funds trapped at offshore banking partner EQIBank as the Dominica-licensed lender fights a U.S. asset seizure that it says could force it into liquidation, creating a fresh test of counterparty risk within the reserves supporting the world’s largest stablecoin.
The exposure was first reported by The Information. Tether subsequently said its funds held with EQIBank amount to less than 0.034% of its total assets, although it has not disclosed the exact dollar value.
Based on Tether’s latest published balance sheet, that percentage would represent less than approximately $63.8 million. The calculation is only an upper bound: Tether reported $187.75 billion of total assets as of June 30, against $183.64 billion of liabilities.
The stablecoin issuer said any impact on its overall reserves would be limited, but the amount ultimately recoverable could depend on the outcome of EQIBank’s legal proceedings and any eventual liquidation.
U.S. Seizure Hit About 80% of EQIBank’s Cash
EQIBank’s problems center on approximately $89 million seized by U.S. authorities from accounts connected with payment processor Capstone Ltd.
Court proceedings involve funds held through accounts at major U.S. financial institutions including Wells Fargo and JPMorgan Chase. EQIBank filed for the return of its property on June 29, while U.S. prosecutors subsequently filed a forfeiture complaint on July 15 seeking approximately $84.2 million.
The seized money represents roughly 80% of EQIBank’s monetary holdings, according to the lender’s filings. On September 9, EQIBank warned that permanently losing access to the funds could force it into liquidation. The bank is contesting the seizure in federal court in California.
That creates uncertainty for depositors including Tether. Funds held at a bank facing liquidation are not necessarily lost, but access can remain restricted while ownership claims and creditor recoveries are resolved.
For Tether, however, the disclosed exposure is small relative to its overall balance sheet.
Exposure Is Small Compared With Tether’s Reserves
Tether’s June-quarter attestation reported $187.75 billion in assets, including a reserve structure heavily concentrated in U.S. government securities and short-term liquidity instruments.
Assets exceeded liabilities by approximately $4.11 billion at June 30. Tether also reported roughly $184.6 billion of USDT outstanding at the end of the quarter and $1.5 billion of net operating profit for Q2.
Even assuming Tether’s EQIBank exposure sits just below the stated 0.034% ceiling, it would therefore represent less than 1.6% of the company’s June excess asset buffer.
The episode nevertheless highlights a different risk from fluctuations in the value of Treasury securities or other reserve investments: banking counterparty risk.
Stablecoin issuers need access to conventional financial institutions for cash management, redemptions and other operations. Money deposited with those institutions can become temporarily inaccessible if a bank fails, enters liquidation or becomes caught in legal proceedings.
The issue has previously affected major stablecoins. Circle disclosed in March 2023 that $3.3 billion of USDC reserves were held at Silicon Valley Bank when it collapsed, temporarily contributing to USDC losing its dollar peg before U.S. authorities guaranteed depositors.
No comparable market reaction has emerged around Tether. USDT continued trading close to $1 on September 25, indicating little immediate market concern over the reported exposure.
The unresolved questions are therefore concentrated at EQIBank rather than Tether’s overall solvency.
EQIBank must either recover the seized assets or navigate the consequences if the U.S. forfeiture action succeeds. Tether, meanwhile, has not disclosed precisely how much money it has at the lender or what proportion is currently inaccessible.
At less than 0.034% of Tether’s assets, the direct exposure appears limited. But the episode illustrates why the location and accessibility of stablecoin reserves can matter alongside their headline asset composition.
