Tether (USDT) Grappling with Allegations of Noble Bank Insolvency

The USDT digital asset uses Noble Bank for its dollar backing, but allegations of insolvency have shaken the market.

Noble Bank, the financial institution backing Tether (USDT), has reportedly gone insolvent. The crypto community is still commenting the news with caution, either dismissing it as fear-mongering or seeing the event as potentially having repercussions for the entire crypto ecosystem.

The alleged insolvency of the bank was announced by the Modern Consensus blog, which based its report on yet unidentified sources. Noble is just one of Tether’s banks, and the news outlet saw earlier connections between the founders of Tether and the bank.

The Bitfinex’ed Twitter account, always skeptical of Tether, considers the news an ominous sign:

https://twitter.com/Bitfinexed/status/1046624108212105216

Others are more cautious, seeing the banking activity as normal and relating it to an ongoing process of bond acquisition by Deutsche Bank. The Noble Group does have solvency problems, but they are related to its commodity trading business, as reported by the Wall Street Journal. So far, the bank’s liquidity situation remains unknown.

There is another connection between the Tether company and the Noble Bank - the latter’s CEO, John Bretts, has worked with Tether’s co-founder Brock Pierce. Noble International Bank is based in Puerto Rico, the hurricane-destroyed country which has drawn the interest of Brock Pierce and has been a hub for the crypto community.

Tether’s banking troubles come just after the launch of three new fully legalized stablecoins - Gemini Dollar, Paxos, and USDC by Circle. Those have easily provable bank backing and are one step ahead of Tether in this regard.

Exacerbating USDT’s troubles was the news of an about $5 million position being sold on Kraken:

https://twitter.com/spiralcal/status/1046412965690454016

USDT keeps the dollar peg despite the selling, but some traders are concerned a panic run may crash the price. Kraken is the only feasible exchange to sell USDT for cash, but daily volumes are relatively low, so a liquidation of $5 million is quite large for the platform.

https://twitter.com/spiralcal/status/1046058365988884480

USDT now trades at around $0.99, which is not an unusual occurrence. However, the latest events show that even with an allegedly dollar-backed coin, market forces can put pressure on the price.