Author: FinTax

On March 24, 2026, Tether, the issuer of the world's largest stablecoin USDT, officially announced that it has signed a contract with one of the Big Four accounting firms (specifics undisclosed) to initiate the first complete independent financial statement audit since its establishment nearly 12 years ago.

As a digital asset company, Tether's main business is the issuance of the USDT stablecoin, which is pegged to the US dollar. According to the official announcement in March 2026, Tether's market capitalization exceeds $184 billion, with over 550 million global users. In terms of asset compliance, Tether has never undergone a complete independent financial statement audit, and its quarterly reserve proof reports have been issued by BDO Italia, a part of the fifth largest accounting firm globally, since 2022. Now, after years of avoiding audits, Tether has finally taken the initiative to start the audit process, drawing high attention from market participants; this article will further analyze the multiple factors driving Tether's proactive audit and the impact of the first audit on Tether and the entire crypto industry, in hopes of providing some insights for market participants.

1. What does Tether’s first audit cover?

1.1 Difference between proof and audit

What Tether is initiating this time is not a new round of reserve proof, but its official statement of the first complete independent financial statement audit. From a professional perspective, while both proof and audit fall under third-party assurance, there are significant differences between the two.

Proof (Attestation) is a limited scope assurance service, issuing a point-in-time statement by an independent accounting firm on a specific date, confirming that the reserves of the stablecoin issuer are at least equal to the total supply of tokens in circulation. A financial audit (Audit), on the other hand, is a comprehensive examination of the entire financial system of the company, covering the balance sheet, income statement, cash flow statement, internal control framework, governance protocols, and adherence to accounting standards. In terms of focus, proof usually revolves around specific matters, emphasizing whether there is a correspondence between the disclosed reserve assets and the liabilities of the circulating tokens; audit looks at a more complete financial system, paying attention not only to the assets and liabilities themselves but also extending to financial statements, internal controls, reporting processes, and related governance arrangements.

In simple terms, the difference lies in: proof addresses the question of "is the particular disclosure valid," while audit further answers "is the overall financial information of the company more reliable." Currently, obtaining proof reports from independent third parties remains a common practice for stablecoin issuers' self-disclosure; precisely for this reason, Tether's transition from proof to comprehensive auditing carries significance not only as an upgrade in disclosure format but also as a push toward requiring greater transparency from stablecoin issuers under a complete financial audit framework, which has evident pioneering importance.

1.2 Main content of this audit

According to the official announcement, the complete independent financial statement audit initiated by Tether not only covers the company's current reserve assets but also includes institutional information such as the company's systems, financial reporting, and internal controls. Although Tether did not further disclose the specific audit details in its official announcement, just considering the reserve assets alone, the complexity and workload of the audit should not be underestimated.

According to the reserve proof report issued by BDO for the fourth quarter of 2025, as of December 31, 2025, Tether's total assets amounted to approximately $192.9 billion, with total liabilities of approximately $186.5 billion. In terms of asset allocation, Tether directly holds more than $122 billion in US Treasury securities, reaching an all-time high; including overnight reverse repurchase agreements, the direct and indirect exposure to Treasury securities exceeds $141 billion, placing Tether among the largest holders of US Treasury securities globally; the reserves also include precious metals, Bitcoin, secured loans, and a small amount of corporate bonds, among others. Furthermore, Tether's proprietary investment portfolio through its global investment fund in fields such as artificial intelligence, energy, and fintech has exceeded $20 billion, but this portion of funds comes from excess profits, strictly separated from USDT reserves. For the auditing party, Tether's assets are a composite reserve structure that spans both traditional financial assets and digital assets. The auditors not only need to verify the existence of these assets but also further audit the ownership, valuation, liquidity, and matching relationship with token liabilities of different assets.

2. Why did Tether initiate this audit?

2.1 Global regulatory framework is tightening

From the current market situation, the continuous tightening of the global crypto regulatory framework is a significant factor prompting Tether to promptly commence a comprehensive audit.

In the United States, President Trump signed the "GENIUS Act" in July 2025, establishing a unified regulatory framework for payment stablecoins at the federal level for the first time. This act requires issuers to sufficiently back the circulating payment stablecoins with qualified reserve assets and publicly disclose the composition of reserves on a monthly basis; for issuers with circulation exceeding $50 billion and not subject to periodic reporting obligations under the Securities Exchange Act of 1934, it also requires the preparation of annual financial statements in accordance with US Generally Accepted Accounting Principles (GAAP), and these should be audited by a registered accounting firm according to applicable auditing standards before being disclosed to regulatory authorities.

In Europe, the EU’s "Markets in Crypto-Assets Regulation" (MiCA), which directly relates to stablecoins, has had its rules for Asset-Reference Tokens (ART) and Electronic Money Tokens (EMT) officially applicable since June 30, 2024. Following that, the European Banking Authority has been pushing for a direct supervisory framework for ART and EMT, with supporting rules that require more detailed expectations for the liquidity of reserve assets and the proportion held in credit institutions; for "significant stablecoins," the relevant minimum holding proportion could be increased to 60%.

In Asia, Hong Kong's "Stablecoin Ordinance" came into effect on August 1, 2025, whereby institutions issuing fiat-referenced stablecoins in Hong Kong or overseas must apply for a license from the Hong Kong Monetary Authority (HKMA). On April 10, 2026, the HKMA officially issued the first two stablecoin issuer licenses to Linklogis Financial Technology Co., Ltd. (License No. FRS01, jointly established by Standard Chartered Bank (Hong Kong), Hong Kong Telecom, and Animoca Brands) and HSBC Hong Kong (License No. FRS02), marking the official entry of Hong Kong's stablecoin regulation into the licensing and enforcement phase.

A series of regulatory trends across different regions globally indicate that the compliance gates for stablecoins are tightening simultaneously, and the external requirements for leading issuers have changed. In the past, reserve proofs could still somewhat satisfy the market's basic concern about an issuer's ability to fully support tokens; however, as the regulatory framework becomes increasingly institutionalized, market attention has gradually shifted from the coverage of reserves to the financial transparency, internal controls, governance capabilities of issuers, and whether they can accept higher standards of continuous external verification. For Tether, a complete audit has become the "top priority" for the company, and one of the key tasks for Simon McWilliams, who was appointed as CFO, is to push the company toward complete financial auditing. If Tether does not take the initiative to move forward with the audit, it faces the risk of being systematically excluded from the mainstream financial system.

2.2 Historical compliance controversies affecting market trust

Since the launch of USDT in 2014, doubts regarding whether "every USDT is fully backed by dollar-denominated assets at a 1:1 ratio" have never ceased.

In April 2019, the New York State Office of the Attorney General (OAG) launched an investigation into Tether and its affiliated exchange Bitfinex, applying for an injunction. The investigation found that since mid-2017, Tether had struggled to maintain normal banking relationships and, at certain periods, failed to support circulating USDT with sufficient dollar reserves in its own bank accounts at a 1:1 ratio. Additionally, the OAG disclosed that Bitfinex suffered approximately $850 million in funds due to its relationship with the Panamanian entity Crypto Capital Corp., and Tether's reserve funds were used to fill this gap—both companies are owned and controlled by the same small group of individuals, creating serious conflicts of interest. In February 2021, the parties reached a settlement: Bitfinex and Tether had to cease all trading activities with New York users, pay a $18.5 million fine, and disclose the asset composition backing Tether on a quarterly basis, including loans or receivables with affiliated entities.

In the same year, in October, the Commodity Futures Trading Commission (CFTC) imposed a $41 million civil penalty on Tether, deeming its statements regarding reserve sufficiency from June 2016 to February 2019 to be false. According to the CFTC announcement, during the 26-month sample period from 2016 to 2018, Tether held sufficient fiat reserves on only 27.6% of days. This means that during the vast majority of time within that window, the full dollar backing claimed by Tether was not actually realized.

Although Tether began issuing quarterly reserve proof reports through BDO Italia after the settlement, progressively disclosing the asset composition to the market, these proofs are distinctly different from a complete independent financial statement audit; merely relying on "snapshot" proof reports is far from sufficient to repair the deep cracks in market trust toward Tether.

2.3 Financing obstacles compel transparency upgrade

Tether is one of the most profitable crypto companies in the world. According to its disclosures, the profit for the entire year of 2025 exceeded $10 billion, with excess reserves reaching $6.3 billion, and the scale of US Treasury holdings reaching $141 billion. However, high profitability has not automatically translated into recognition in the capital markets. From subsequent financing developments, it is evident that the market's real focus is no longer solely on profits but on whether these profits, reserves, and asset allocations can withstand higher standards of external verification.

In November 2025, S&P Global Ratings downgraded Tether’s stablecoin stability assessment from 4 (restricted) to the lowest level 5 (weak). This assessment system measures a stablecoin's ability to maintain its peg to fiat currency, with score ranges from 1 (very strong) to 5 (weak). S&P indicated that the downgrade was due to the increasing exposure to high-risk assets within USDT reserves, including Bitcoin, gold, secured loans, and corporate bonds, with limited relevant disclosure information.

Furthermore, according to Bloomberg, Tether sought to conduct large-scale private financing at a valuation of approximately $500 billion in September 2025, planning to offer about 3% of equity, with the fundraising amount potentially reaching up to $20 billion, with US financial services company Cantor Fitzgerald acting as the chief advisor. If the financing were completed based on this valuation, Tether would rank among the highest-valued private companies globally, alongside SpaceX and OpenAI. However, Tether’s financing progress has not been smooth. In February 2026, according to the Financial Times, due to investor concerns over valuation and transaction size, the discussed financing amount had been drastically reduced from approximately $15-20 billion to about $5 billion. The core concerns of investors are twofold: first, Tether has never undergone a complete independent audit, leading to insufficient financial transparency; secondly, there remains uncertainty in the regulatory environment.

When a company with annual profits exceeding $10 billion is unable to complete financing at its expected valuation, the market has effectively begun to reprice based on this deficiency of "lack of audit." In this context, auditing is not just a compliance requirement but also a prerequisite for Tether to enter the mainstream capital market.

3. What impact will Tether’s audit have?

3.1 For other stablecoin issuers: industry transparency standards are being forcibly raised

As the largest stablecoin issuer, Tether's initiation of the four major audits objectively sets a higher standard for transparency within the industry. Previously, the common practice among stablecoin issuers was to use reserve proofs, which are limited forms of assurance. Tether's move may shift the minimum compliance benchmark in the industry from proof to audit. For small to medium-sized issuers that are still relying on proof, they may face greater disadvantages in institutional partnerships and regulatory access. The stablecoin industry may enter a new phase of elimination based on compliance capability.

3.2 For institutional investors: audits open compliance channels for crypto asset allocations

For a long time, institutional investors such as pension funds, sovereign wealth funds, and large asset management companies have been cautious about the crypto market, one of the core reasons being the lack of financial transparency of the underlying assets tested by recognized standards. As the most widely used trading medium and settlement tool in the crypto market, USDT is nearly unavoidable for institutional capital entering the crypto market. Without having undergone a comprehensive audit, investment strategies involving USDT lack sufficient risk control basis, and many institutions’ related plans are often shelved during the internal approval stage of the compliance departments.

If Tether’s reserves ultimately pass the four major audits and receive an unqualified opinion, USDT will be endorsed with the world's strictest financial evaluation standards for the first time. This will provide institutional investors' compliance departments with formal documentation that can be submitted to regulatory authorities, consequently lowering the compliance threshold for institutional capital entering the crypto market.

3.3 For exchanges and DeFi protocols: liquidity patterns may face reshaping

USDT plays a core role as a liquidity infrastructure in the crypto market. According to Tether's report for the fourth quarter of 2025, as of December 31, 2025, the circulation of USDT was approximately $186.5 billion. Among major global crypto exchanges, USDT has the strongest trading pair liquidity. Market makers quote in USDT, and users enter and exit various assets using USDT, while numerous lending pools and liquidity pools in DeFi protocols are also based on USDT as collateral. It can be said that USDT is deeply embedded in various aspects of the crypto trading system; if its liquidity encounters problems, the impact will rapidly transmit throughout the entire market.

For this reason, the impact of the audit results on exchanges and DeFi protocols is twofold. If the audit proceeds smoothly, USDT's status in the compliant market will be further strengthened. Especially among licensed exchanges in the US and Asia, USDT verified by the four major audits will find it easier to gain compliance recognition from regulatory authorities. However, if the audit reveals significant reserve issues, exchanges may be forced to reduce their USDT exposure and increase alternative trading pairs, and DeFi protocols will need to reassess the security of assets collateralized by USDT.

3.4 For accounting firms: how stablecoin audits change the auditing industry

Tether's initiation of the first complete independent financial statement audit is significant for accounting firms not only because it undertakes a large crypto client project but also because such audits, long in high controversy and complexity, are being formally integrated into the business scope of mainstream auditing firms. The standards set by the Big Four encompass dimensions such as internal control, related transactions, valuation methods, and going concern, far exceeding the proof report frameworks commonly used in the current stablecoin industry. Once Tether completes the audit and receives a formal opinion, it will become the first large stablecoin issuer to undergo a comprehensive financial audit. For regulatory authorities, the audit results will provide a reference benchmark for stablecoin disclosure standards; for other issuers, the market and investor expectations for transparency will be raised overall, and maintaining existing minimum disclosure levels may no longer be sufficient.

At the same time, the practices of the Big Four in auditing crypto companies are also accumulating methodologies for the industry. Once leading firms begin to gain experience in this field, stablecoin audits may evolve from individual projects into a new type of professional service. The methodologies developed during Tether's audit could potentially become a reference paradigm for future audits of crypto companies, promoting the establishment of the entire industry's auditing infrastructure from the ground up.

4. Conclusion

For Tether, signing the audit contract is only the starting point; when the final report is released, what reserve details will it reveal, and whether the audit opinion will be unqualified are all factors that still pose challenges to be overcome. If Tether successfully passes the audit, it will mark a significant phase in resolving the long-standing reserve disputes and provide a key trust foundation for the mainstreaming process of the entire crypto industry. Regardless of the outcome, this step itself has already changed the game rules of the industry. This audit not only tests Tether's reserve assets but also examines whether the entire crypto asset industry is ready to accept scrutiny for its commitments.

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