Tether’s Solvency Fight: CoinShares Says ‘Surplus’; Hayes and S&P Say the Questions Remain

CoinShares rebuts solvency alarms and frames the debate

CoinShares has publicly challenged recent warnings about Tether’s reserves, arguing that the stablecoin issuer sits on a multibillion-dollar surplus and that fears about immediate insolvency are misplaced. That counterpunch lands after a wave of criticism from traders and commentators — most notably Arthur Hayes — and a skeptical note from S&P Global that flagged gaps and risks in Tether’s disclosures.

The exchange of claims has become the market’s main narrative this week. For traders, it matters because doubts about Tether (the issuer behind the USDT token) can change flows, widen stablecoin spreads and nudge Bitcoin and other crypto prices. CoinShares’ statement aims to calm markets by saying the reserve math favors Tether; skeptics say the math is incomplete or opaque, leaving tail risks that could still matter in a crisis.

How CoinShares says the surplus is calculated

CoinShares laid out a fairly straightforward approach: start with reported holdings that correspond to Tether’s claimed liabilities, adjust for liquid assets, and then apply conservative haircuts to less liquid items. The firm says that even after conservative adjustments the net picture is a sizeable surplus — billions of dollars beyond the amount needed to back outstanding USDT.

Key pieces of CoinShares’ reasoning include a tally of cash and cash-like instruments, short-term money market positions, and market-value estimates for certain securities they link to Tether. CoinShares also notes on-chain data showing stability in Tether-issued supply and redemption patterns, which, they argue, reduces the likelihood of a sudden, disorderly run.

The report is not a formal audit. CoinShares relies on public filings, disclosed balances and third-party data sources rather than privileged access to Tether’s bank statements. The team says it applies conservative haircuts and explicitly flags assumptions where data is thin — for example, when valuing private placements or cross-holdings that aren’t fully transparent. CoinShares also highlights that on-chain metrics, while useful, cannot reveal off-chain liquidity or the precise composition of reserve assets.

Hayes and S&P Global’s objections — and why they carry weight

Arthur Hayes, a high-profile former exchange executive, has framed the issue bluntly: paper surpluses don’t guarantee cash on hand when counterparties freeze or markets seize up. His critique focuses on liquidity risk and the potential for reserve assets to be harder to convert to dollars than their face value suggests.

S&P Global (SPGI) added institutional heft to the skepticism by flagging gaps in public disclosure, the lack of regular, fully independent audits, and questions over the custodial chain for large parts of the reserves. S&P’s note emphasizes governance and counterparty concentration as sources of systemic risk — not necessarily evidence that Tether is insolvent today, but that the risk profile is materially different from a fully audited bank-style balance sheet.

Both critics stress provenance: auditors, bank statements and real-time custodial reporting matter because they change a theoretical surplus into usable liquidity under stress. Their credibility comes from emphasizing scenarios — freezes, bank runs, or regulatory actions — where valuation and convertibility diverge.

How markets have reacted so far and what could change

The debate has shown up in several market signals. USDT spreads versus other stablecoins widened briefly as traders priced in uncertainty, and there was a pickup in redemptions and issuance shifts across the stablecoin market. Bitcoin (BTC) saw increased volatility tied to these flows: when traders fear stablecoin stress, they reduce leverage and cash out into fiat or other stablecoins, which can push prices lower for a spell.

CoinShares’ rebuttal appears to have calmed some short-term panic: spreads tightened and large outflows slowed, suggesting the market took the surplus claim seriously. But these moves can reverse fast if new evidence surfaces — for example, a major bank freezing assets linked to Tether or a credible, independent audit revealing shortfalls. High-frequency traders and arbitrage desks will watch redemption windows and on-chain mint/burn patterns closely for early warnings.

Why reserve transparency still matters beyond the headline surplus

This dispute highlights two structural issues: first, stablecoins are only as safe as the liquidity and convertibility of their backing. A paper surplus loses value if assets are illiquid or encumbered. Second, disclosure cadence and independence matter. Regular, deep audits and clearer custody chains reduce the chance of a nasty surprise and lower market stress in turbulent times.

Regulators are also paying attention. Greater transparency or enforceable reserve rules would cut tail risks but could force structural changes to how large issuers operate. Even with a reported surplus, concentrated banking relationships or opaque asset types can create transmission channels to the broader crypto system.

What investors and traders should watch next

Daily USDT issuance and burn data on-chain — sharp redemptions are an early warning.
Stablecoin spreads and FX swap rates — widening spreads signal stress or liquidity drying up.
Any formal audit filings or bank-confirmation documents tied to Tether’s reserves.
News of bank freezes, custodial disputes, or regulatory actions involving Tether’s counterparties.
Large wallet movements from known Tether-linked addresses to exchanges or custodial accounts.

Bottom line: CoinShares’ analysis is a meaningful counterweight to alarmist takes and suggests usable surplus on paper. But Hayes and S&P remind investors that convertibility and transparency, not just headline surplus numbers, determine real-world risk. For traders, the smart play is to watch flows and disclosures closely and treat surplus claims as comforting but not definitive proof against stress.

Photo: RDNE Stock project / Pexels

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