Deltec, the Bahamas-based bank that holds reserves for stablecoin issuer Tether, stated today that it has a “large position” in Bitcoin.

Chief Investment Officer Hugo Rogers, in a 2020 review video, said of Deltec’s holdings: 

“It also includes a large position in bitcoin, which has received a lot of attention recently. We bought bitcoin for our clients at about $9,300, so that worked very well through 2020. And we expect it to work well in 2021 as the liquidity crisis continues to run hot.”

Tether is perhaps Deltec’s most famous client. According to market data provider CoinMarketCap, Tether has a circulating supply of 24.3 billion USDT. Since the stablecoin issuer claims each USDT is “fully backed by our reserves” and each USDT is pegged to the dollar, that means it should have assets worth $24.3 billion in the bank. According to Tether’s website, its reserves “include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties.”

So, the question is: Is Tether backed, in part, by Bitcoin? If so, a crash in the price of Bitcoin could reduce investors’ ability to remove funds.

And the answer is…unclear.

Tether’s last published transparency update, from June 1, 2018, claims a total of $2.54 billion in USD distributed across two bank accounts. That amount was more than its reported market cap at the time.

A letter produced by Tether from Deltec, dated November 1, 2018, seemingly confirmed that Tether was a client, though it used creative wording to discuss how many dollars were in the account: “We hereby confirm that, at the close of business on October 31, 2018, the portfolio cash value of your account with our bank was US$1,831,322,828.” (Emphasis ours.)

Moreover, Deltec hasn’t divulged which clients it’s holding Bitcoin for, as Tether isn’t Deltec’s only customer. In fact, at least one other crypto company seems to use it as well, crypto derivatives exchange FTX.

We do in fact, and so can sometimes do the fiat leg over weekends, but can’t get money in/out of that bank over weekends in the first place

— SBF (@SBF_Alameda) January 13, 2021

So, this could all be much ado about nothing, smoke without fire.

But others find it curious, especially as crypto exchange Bitfinex, which shares a leadership team with Tether, has been rumored to own a large stake in Deltec.

So Bitfinex invests in Deltec, Tether claims in court they should be able to invest in as much bitcoin as they want with reserves, and now Deltec has a large position in Bitcoin. Cool. I’m sure there is nothing to see here

— Bennett Tomlin (@BennettTomlin) January 14, 2021

Tether isn’t just the subject of rumors. It’s also the subject of a New York Attorney General’s Office investigation. The NYAG has been looking into whether Bitfinex gave Tether loans to hide $1 billion in losses.

None of this has stopped Tether’s forward progress. It is the third-largest cryptocurrency by market capitalization and remains the most-used stablecoin.