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The asset-backing risk of stablecoin trading: The case of Tether

Author

Listed:
  • Fernández Francisco Javier Jorcano

    (The Startup CFO. C. Orense, 12, 1º-4, 28020, Madrid, Spain)

  • Fernández Miguel Ángel Echarte

    (DEKIS Research Group, Department of Economics, Catholic University of Ávila, C. Canteros S/N, 05005, Avila, Spain)

  • Alonso Sergio Luis Náñez

    (DEKIS Research Group, Department of Economics, Catholic University of Ávila, C. Canteros S/N, 05005, Avila, Spain)

Abstract

This article aims to analyse the asset-backing risk of stablecoins, focusing on international accounting standards, classification criteria, and auditing standards and using Tether as a case study. It examines Tether’s issuance, backing, controls, ratios, and regulations to assess risk transmission and mitigation. The results suggest a need for unified and strengthened accounting and auditing standards to enhance user confidence. Liquidity, solvency, and debt ratios were applied to Tether’s balance sheets; while Tether has made efforts to increase its transparency, and although it possesses highly liquid assets, challenges remain regarding its liquidity, solvency, and debt. An independent auditors’ valuation is crucial for investor confidence, demonstrating that more specific regulations are required for stablecoins. Future research should explore other stablecoins to comprehensively understand the accounting and auditing challenges in the field.

Suggested Citation

  • Fernández Francisco Javier Jorcano & Fernández Miguel Ángel Echarte & Alonso Sergio Luis Náñez, 2024. "The asset-backing risk of stablecoin trading: The case of Tether," Economics and Business Review, Sciendo, vol. 10(1), pages 57-80, April.
    • Handle: RePEc:vrs:ecobur:v:10:y:2024:i:1:p:57-80:n:7
    DOI: 10.18559/ebr.2024.1.1211
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    References listed on IDEAS

    as
    1. Auer, Raphael & Tercero-Lucas, David, 2022. "Distrust or speculation? The socioeconomic drivers of U.S. cryptocurrency investments," Journal of Financial Stability, Elsevier, vol. 62(C).
    2. Garth Baughman & Jean Flemming, 2023. "Global Demand for Basket Backed Stablecoins," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 244-264, April.
    3. José Almeida & Tiago Cruz Gonçalves, 2022. "Portfolio Diversification, Hedge and Safe-Haven Properties in Cryptocurrency Investments and Financial Economics: A Systematic Literature Review," JRFM, MDPI, vol. 16(1), pages 1-25, December.
    4. Elena Vladimirovna Travkina & Alim Borisovich Fiapshev & Marianna Tolevna Belova, 2022. "Stablecoin-Based Digital Trading and Investment Platforms and Their Potential in Overcoming Sanctions Restrictions," Economies, MDPI, vol. 10(10), pages 1-10, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    stablecoins; auditing; IFRS; risk management; volatility; balance sheet;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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