Determine USDT’s Exposure to Silicon Valley Bank During the March 2023 Collapse

Determine whether Tether Holdings Limited’s USD-pegged stablecoin USDT had any exposure to Silicon Valley Bank during the March 2023 collapse, including whether any portion of USDT’s reserves was held at SVB as deposits, given the lack of public disclosure regarding USDT reserve custodians and locations.

Background

The paper contrasts the market impact of the Silicon Valley Bank collapse on two leading fiat-backed stablecoins: Circle’s USDC, which publicly disclosed a significant cash reserve exposure to SVB, and Tether’s USDT, which provides less frequent and less detailed reserve disclosures. This comparison underpins the study’s Difference-in-Differences design, treating USDC as exposed and USDT as a control.

The authors highlight that while USDC’s exposure to SVB is documented, it is not publicly known whether USDT had any exposure to SVB, due to Tether’s opacity about reserve composition and custodial arrangements. Clarifying USDT’s exposure would resolve a key uncertainty affecting interpretations of the liquidity and flight-to-safety dynamics documented in the paper.

References

This choice is dictated by the fact that the two assets are similar in most aspects (i.e. type of backing, adoption, liquidity) except for the exposure that USDC disclosed to the SVB bankruptcy[14,33]. Noticeably, it is unknown whether or not USDT was also exposed to the event[15], as Tether is far less transparent about the nature and location of its reserves[70].

— No Questions Asked: Effects of Transparency on Stablecoin Liquidity During the Collapse of Silicon Valley Bank  (2407.11716 - Cruz et al., 2024) in Introduction, paragraph preceding Section 1 (Related Work)