Tether’s Partner Bank Faces Asset Freeze, Highlighting Stablecoin Counterparty Risk
Tether, the issuer of the world’s largest stablecoin, USDT, confirmed on Thursday that its partner bank, EQIBank, has had $89 million in assets frozen by U.S. prosecutors. While this represents a relatively small portion of Tether’s overall holdings, the incident underscores the persistent counterparty risk inherent in the banking relationships underpinning stablecoins.
A Tether representative stated that the frozen assets constitute “less than 0.034%” of the group’s total assets, which stood at $18.775 billion as of June. This translates to approximately $6.4 million, a figure that would have a negligible impact on Tether’s reserve ratios and poses no direct threat to USDT’s peg to the U.S. dollar.
However, the asset freeze, as reported by the Financial Times and The Information, has illuminated an often-overlooked risk for stablecoin issuers. Stablecoins do not directly hold U.S. dollars; instead, they rely on a complex network of banks and payment processors to manage customer deposits and redemptions.
EQIBank’s funds originated from payment processor Capstone, which held funds for EQIBank within the U.S. and routed customer money through accounts at Wells Fargo and JP Morgan. According to court filings, Capstone allegedly misrepresented its business activities to the banks.
U.S. prosecutors subsequently seized funds from these accounts and initiated civil forfeiture proceedings, accusing Capstone of misrepresenting its business model to financial institutions. EQIBank later announced that the $89 million freeze included cryptocurrency assets, such as 450,000 BTC and 150,000 ETH.
In an email, a Tether representative stated, “Tether was unaware of Capstone’s actions” and reiterated that the EQIBank assets held by the group represented “less than 0.034% of the group’s assets.”
Tether’s total assets, as declared in June, included approximately 50% in short-term U.S. Treasury bills maturing within one year, with the remainder held by custodian banks in New York and various partner institutions. EQIBank was responsible for facilitating wire transfers for USDT purchases and redemptions but did not hold Tether’s primary reserves.
In contrast, Circle, the issuer of USDC, employs a more transparent strategy, holding assets across multiple banks and clearinghouses in various jurisdictions and publishing monthly reserve details.
Meanwhile, EQIBank also provides banking services to several cryptocurrency exchanges, including processing some transactions for Binance, Kraken, and Coinbase. This interconnectedness means that the failure of a single banking partner could simultaneously impact the liquidity of multiple platforms.
This incident demonstrates that even a stablecoin leader like Tether is not entirely immune to banking risks. The operational model of stablecoins depends on a chain of “banking conduits,” from deposit banks to payment processors and clearinghouses, each presenting potential counterparty risks.
Compared to the liquidation of Bitcoin holdings, the risks associated with stablecoins are more “institutional” in nature, driven not by market sentiment but by the operational efficiency of the funding channels themselves.
While a hypothetical collapse of EQIBank would reduce Tether’s reserve ratio by 0.034%, it would not materially affect USDT’s dollar peg. However, the event serves as a reminder that stablecoin “reserves” are not entirely insulated and are distributed across a network of banks and payment processors.
Future observations will focus on whether Tether will disclose more detailed reserve breakdowns and whether EQIBank’s network of banking partners harbors additional potential liquidity risks.
