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Tether’s Bank Partner Updates its Crypto Strategy

Tether's reported bank partner Capital Union, which also supports a myriad of other cryptos as part of its trading and custod

Tether stablecoin’s bank partner Capital Union, a Bahamas-based bank, which holds a small portion of reserves by the stablecoin issuer, has been working incessantly in the cryptocurrency industry. The bank has introduced a wide variety of crypto trading and custody services to its official clients as part of the banking institution’s trading desk, according to a spokesperson for Capital Union.

“We work with a limited number of trading avenues and liquidity providers as well as a few selected custodians and tech providers, which allows us to support a large number of digital assets as part of our trading and custody services,” the spokesperson told Cointelegraph.

The bank’s crypto-based services still represent a very small portion of its business, which is primarily focused on offering conventional wealth management and investment services, the correspondent added. He did not comment on what digital assets are supported on the bank’s platform or when they were launched, suggesting:

“We do not have a directional view on crypto markets or any stablecoins or altcoins. However, as a forward-looking financial institution, Capital Union has chosen to enable its professional clients to trade in this new digital asset class, if they want to be involved.” Meanwhile, the bank has also been actively involved in creating “transactional blockchain-related abilities” as Capital union expects this to be a part of “significant disruption for the financial industry.”

The banking institution’s latest crypto-related claims follow a Monday report which states that Tether held some of its reserves at the Capital Union bank. The bank’s correspondent refused to confirm or deny Capital Union’s involvement in Tether’s operations to news outlets, citing privacy reasons. The correspondent also added that the only official information can be found in Capital Union’s annual reports.

Established in 2013, the banking institution managed $1 billion of digital assets by the end of 2020. Moreover, Capital Union collaborated with Chainalysis in April this year to guarantee the safe and amenable rollout of its crypto services such as trading and custody. According to the respondent, the Bahamas was one of the first countries to adopt a regulatory framework called the DARE Act in 2020.

“As a locally regulated bank, this enables us to provide crypto-related services to our professional clients, including financial institutions, banking intermediaries, and professional holders,” the representative for Capital union said.

“More Transparency is Required”

On the other hand, stablecoin issuers are launching stringent auditing protocols in the wake of Terra’s UST collapse. The Terra crash had also resulted in Tether (USDT) losing its peg to the U.S. dollar. The stablecoin recently had a $10 billion drop in its distribution supply, taking its market capitalization at just above $73 million, as per data by CoinGecko.

Alexandre Lores, Director of Blockchain Market Research at Quantum Economics, said stablecoin issuers such as Tether (USDT), the largest of the stablecoins, should be offering external audits of its crypto assets. “I think more transparency is required in terms of displaying what Tether (USDT) actually holds on its balance sheet,” he said.

He further added that backing a stablecoin (Tether) with a volatile crypto asset makes no sense at all and “as long as Tether have not carried out transparent audits of their assets in real-time, it’s going to be a problem,” he said.