Stablecoin issuer Tether has added Britannia Bank & Trust, a privately-held bank operating in the Bahamas, to process dollar transfers, according to people familiar with the matter.
While it’s unclear when the banking relationship started, Tether has instructed clients to send money to Britannia’s bank account in recent months, the people said, asking not to be identified discussing private information.
Tether, whose USDT token underpins much of the trading in the estimated $1 trillion crypto market, didn’t respond to requests for comment. A spokesperson for Britannia Financial Group, the parent of Britannia Bank & Trust, declined to comment.
Tether hasn’t publicly disclosed the full extent of its banking relationships, fueling industry speculation over where and how the British Virgin Islands-registered company accesses and stores the $86 billion of assets that it says back the world’s most used digital currency. Stablecoins are crypto tokens that are usually pegged one-to-one to an asset such as the dollar and are mostly used by traders to move digital assets between exchanges.
“The secrecy surrounding Tether’s banking relationships continues to be a major impediment for developing the cryptocurrency industry, deterring regulatory approvals on other matters, and discouraging traditional asset managers with little tolerance for regulatory risk from more active participation in the space,” said Patrick Tan, general counsel for ChainArgos, a blockchain data analytics firm.
Access Struggle
The privately-held Tether has struggled to obtain and maintain access to the traditional financial system. In 2017, Wells Fargo & Co. ended its role as a correspondent bank through which customers in the US could send money to Tether and Bitfinex’s banks in Taiwan.
Still, prior to the closure of New York-based Signature Bank in March, some clients of Tether were able to pay for the stablecoins by sending dollars to one of Tether’s banking partners Capital Union Bank via Signature Bank, Bloomberg previously reported.
Paolo Ardoino, the chief technology officer of Tether, told Bloomberg in March that its banking partners include Bahamian lenders Deltec Bank & Trust Ltd. and Capital Union Bank, while Cantor Fitzgerald is a custodian for Tether’s Treasury bill holdings.
In 2021, Tether reached a settlement with the New York’s Attorney General over allegations that it lied about its reserves and hid losses.
Amid US scrutiny on the industry, it’s been challenging for many crypto firms to secure banking partners in the US. Earlier this month, the Federal Reserve said it’s stepping up scrutiny of banks’ involvement in digital assets, including stablecoin activity, after the meltdown of several high-profile crypto firms.
Read more: Tether Growth While Trading Falls Adds to Stablecoin’s Mystique
Britannia Financial Group is a London-headquartered financial services firm that’s been raising its profile in recent years after buying several businesses, including a specialist commodities brokerage. Its chief executive officer, Mark Bruce, joined the group in January 2022 from Jump Trading, where he served as the head of fixed income, currencies and commodities for the business development team.
Last April, Britannia announced the acquisition of Alphaplate Ltd., a proprietary crypto trading firm. Bruce, in a statement then, said crypto is an “increasingly important asset class” to many of its clients.
The founder of Britannia, Julio Martin Herrera Velutini, was charged in August 2022 by the US Department of Justice in relation to a bribery scheme over a former governor of Puerto Rico’s campaign. Herrera, a dual Venezuelan-Italian citizen, has pleaded not guilty and is awaiting trial.
The company has asked the UK Financial Conduct Authority to approve Julio Cesar Herrera, the 26-year-old son of Herrera, as the controller of the family trust that oversees the group in replacement, Bloomberg reported in May.
The total value for Tether stablecoins in circulation has increased about 24% this year to $82 billion, while the market value of its chief competitor, Circle Internet Financial’s USD Coin, has plunged during in the same period.