In news that will shock anyone who’s been involved in the crypto industry for any significant amount of time, Tether announced last week that it had finally received the audit it had been promising for almost a decade.
While traders celebrated and critics scoffed, the audit, which was certainly a step in the right direction, doesn’t put all the questions involving Tether to bed.
The good, the bad, and the unanswered
First of all, it’s important to recognize that an audit of any kind involving Tether is a notch above the quarterly reserve reports they’ve been provided through BDO Italia.
Think of reserve reports as little more than single snapshots into a company’s financials, while an audit would be more akin to a video, recording everything for more than a moment.
It’s also worth pointing out that the audit was carried out by KPMG, which along with Deloitte, PricewaterhouseCoopers, and Ernst & Young, is one of the so-called “Big Four” accounting firms.
Tether received its audit from KPMG’s US arm, the firm’s most esteemed wing.
Of course, the Big Four was once the “Big Eight,” proving that, despite these entities having stronger reputations than their lesser known competitors, they’re still prone to making mistakes and occasionally going bankrupt as a result.
Many commentators have been quick to point out that the KPMG audit was for Tether International not Tether’s parent company, Tether Holdings or Digfinex.
Digfinex is an umbrella corporation that has owned equity for Tether and the crypto exchange Bitfinex, so while it would be nice to see Digfinex get an audit as well, it doesn’t affect the results in relation to Tether.
Tether’s reserves have previously been used to cover Bitfinex customer fund shortfalls, so it’s entirely possible that these reserves could be used similarly in the future or even right now.
While it would be nice to be able to say that Tether and Bitfinex funds are absolutely not comingled, Tyler Menzer, a CPA assistant professor at Texas Christian University, told Protos, “The audit is uninformative without the financial statements that were provided to KPMG.”
He added, “Since the year 2000, 99.93% of reported audits have received unqualified opinions.”
Every time Tether was going to get an audit
The bad
Just because Tether was able to acquire an audit from KPMG doesn’t mean that it’s any more transparent than it was pre-audit.
The opaque nature of Tether is seen as a feature, not a bug, to Tether executives and crypto insiders.
It remains unclear what its secured loans look like, exactly what “other investments” are on its balance sheet, or why 13% of its reserves are made up of volatile assets such as precious metals and $BTC.
Due to the fact that so much of Tether’s balance sheet (~25%) remains in assets that aren’t cash or cash equivalents it’s not difficult to foresee a future in which the stablecoin issuer could become insolvent and unable to satisfy customer withdrawals.
Worryingly, Tether’s cash and cash equivalents have decreased by over 10% since it was under the scrutiny of the New York Attorney General.
These ratios would be considered blasphemous for money market funds or other assets attempting to peg themselves to the value of the dollar, so it’s reasonable to feel unease about Tether’s reserves.
Next, the fact that Tether is utilizing its audit as a marketing strategy, while not unheard of, is concerning and generally seen via the likes of penny stocks and other extremely high-risk asset classes.
Before the foundation of the FDIC, it was more common to see banks and other financial entities utilize audits as a marketing gimmick to gain customer trust — meaning the last time any bank or shadow bank was advertising a cleared audit as a reason to trust them was in the 1930s.
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The unanswered
What the 2025 audit from KPMG doesn’t accomplish is clarity on Tether’s past indiscretions.
CEO Paolo Ardoino and former General Counsel for Tether, Stuart Hoegner, promised that Tether would acquire audits for 2018 and every year going forward.
Unfortunately, as Menzer told Protos, Tether getting audits for those years is “practically unfeasible,” due to the fact that auditors would have needed to already have been engaged for 2018 on and have clear records provided to them.
This was never the case.
Needless to say, Tether has no reason to bring clarity to the years it was unbacked and suffering through numerous crises, as shedding light on those events wouldn’t help it prove its reliability, upstanding corporate behavior, or how being functionally insolvent was actually fine.
There is no reason to expect an audit for any previous years Tether has existed.
In years past, Tether leadership has stated that audits were impossible due to “excruciatingly detailed procedures.”
While it’s unknown what’s changed since then, we do know a few specifics about the process, from both Tether and auditors. For instance, Tether CEO Paolo Ardoino has been making the rounds, bragging about how every gold bar it owns has been seen and verified by auditors.
This is nothing new and if auditors hadn’t done so, they wouldn’t have been able to give Tether an unqualified opinion.
What’s more questionable is how auditors accounted for Tether’s $BTC and crypto holdings and how expensive the audit was for the company.
Another question that remains wholly unanswered is why this audit took over half a year to be produced.
Usually, auditors are required to make the rounds at the end of a fiscal year so they can provide an audit early in the next year.
The fact that Tether’s audit took eight months to conduct, while not a definitive strike against it, leads one to wonder exactly what the hold up could have been.
Meanwhile, a question that’s lingering in the crypto industry is why bother with the audit at all?
While many years of audits would be necessary for Tether to go public, there are no signs that it’s pushing for an IPO or reverse merger in the near-future. It’s also consequential that the type of audit that Tether engaged in — utilizing American Institute of Certified Public Accountants standards (AICPA) — cannot be used when attempting to take a company public.
To IPO or clear the hurdles for a reverse merger a company must instead engage in a Public Company Accounting Oversight Board, or PCAOB, standard audit.
Outside of proving critics and skeptics wrong, it’s unclear why Tether pushed forward with the audit from KPMG.
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What to expect going forward
So, what should the public expect from Tether and its financial disclosures going forward?
Probably not much.
The company is no longer required to provide quarterly reserve reports, though it continues to do so.
These reserve reports are by no means providing transparency and while the audit from a Big Four auditor is good, without the documentation provided to KPMG, it doesn’t mean anything.
What’s likely is that Tether could pivot to PCAOB standards in the coming years and utilize the AICPA audit as a financial statement for years past when or if the executive leadership decides to take the entity public.
To be clear, until Tether and iFinex provide disclosure that mimics what other major financial institutions provide, the audits mean little to the public and should not be relied on as an assurance of trustworthiness.
