Rumour has it that Noble Bank is under the hammer, and people are having trouble unloading their Tethers.
The Tether saga is the gift that just keeps on giving. And if recent rumours hold water, it might have just taken a hot new turn. Bloomberg is now citing "a person with direct knowledge of the situation" who says Noble Bank is now looking for a buyer, after losing customers including Tether and Bitfinex.
It's an unusual turn given the extremely close relationships between these three entities, which practically share the same management and legal team.
At the same time other anonymous sources suggest that the problem might extend to Tether. They paint a picture of a cash-strapped company desperately looking for a new cash injection. The end result is that largely unfounded rumours of a Tether insolvency are now circulating the cryptocurrency ecosystem, stoked by vaguely irresponsible and highly speculative pieces (such as this one) that just cite the same old sources in increasingly hysterical ways.
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A surprise twist
Noble Bank could price itself somewhere between $5 million and $10 million, the anonymous insider is reported as saying to Bloomberg, based largely on the value of its Puerto Rican licence to operate as an international financial entity. This could be a useful cash injection for someone.
At the same time, Tether's most vocal critic, Bitfinex'ed, has dug up some court records from 2015, showing that Noble Bank was accused of asking staff to cook the books. It's worth noting that the case was dismissed in December 2016 though, so it might not be worth reading too much into. Plus, the anonymous Bitfinex'ed is a man/woman on a mission specifically to discredit Tether and Bitfinex, so take it with a grain of salt.
It's similarly worth exercising caution regarding Noble Bank's rumoured divorce with Tether and Bitfinex. One anonymous source isn't necessarily the repository of all truth. With that in mind, the person apparently also said that Noble Bank no longer has a relationship with Bank of New York Mellon, which Noble Bank said it was previously using as a custodian.
The overall picture is of a potential Noble Bank insolvency. A piece by Modern Consensus, citing its own sources who may or may not be the same person(s) that spoke to Bloomberg talk of a dire situation at Noble Bank.
"If Noble doesn’t get cash soon, they will only have a few days left," said the source. "They’re desperate."
Someone else, a supposed insider at a major exchange, said Tether was in similarly dire straits. They recalled the story of someone trying to unload "tens of millions of Tethers" without successfully finding a counterparty.
If the story is true, it means people are already trying to get rid of their Tethers without much success. It's notable, because you can supposedly trade in Tethers for an equivalent fiat amount through the Tether company itself. That someone is trying to do this in such large amounts through an exchange, rather than through Tether itself, might mean one of two things. Either they don't want to verify their identity with Tether and instead want to make the conversion on an anonymous exchange, or Tether doesn't have the funds to buy back its own Tethers.
There's no way of saying how reliable any of the anonymous sources are, but it does make a lot of sense that this would start happening now. An independent audit would help set minds at ease, but Tether has previously babbled its way out of them, instead declaring, without any kind of good excuse, that it will never be audited full stop.
This left it with some credibility issues, which opened the door for competitors to offer a more transparent fully-audited stablecoin. In this way, good old fashioned market forces might end up being its undoing.
The reason this is striking now, if it is indeed striking now, might be because stablecoin competitors have pulled the rug out from beneath Tether, quietly turning Tether holders into bagholders
. But according to CoinMarketCap and similar sources, Tethers are still changing hands as usual.
Between March 2018 and August 2018, outstanding TrueUSD (a stablecoin Tether competitor) grew from $4.7 million to over $73 million, as confirmed by audits from the Cohen and Company accounting firm.
Then there's the Gemini stablecoin which launched on September 11, with an initial circulating distribution of $100,000 according to a BPM audit (PDF). It hasn't yet reached its second monthly audit date, but blockchain magic says there are about $2.5 million worth of Gemini dollars in circulation, just a few weeks after launch. Elsewhere, projects like Stronghold, along with more exotic next-gen stablecoins like ndau and Dai are making their own further inroads.
By the numbers, it looks like collateralised stablecoins are seeing monumental growth, which might be taking away from Tether's bottom line.
When it had a pseudo-monopoly, Tether could probably continue chugging along more happily without too many people ever cashing out. But now that more reliable and transparently audited options are available, and seeing uptake on various exchanges, there's less reason to use Tether.
It's too early to say whether this is the beginning of the end for Tether – people have been predicting its abrupt demise for a long time now – but if it does happen, this might be a sensible time for it to happen.
The news from Noble Bank might be quite telling. If Tether needs a real cash injection, Noble Bank might be an asset which can be liquidated.