Tether's KPMG Audit Clears Hurdle, But Transparency Gaps Persist Amid Shrinking Reserves

Woofun AI reports that Tether has achieved a critical milestone in its decade-long quest for financial verification, securing an unqualified opinion from KPMG for the fiscal year ending December 31, 2025. This highest rating signifies that the auditor believes the financial statements of Tether International S.A. de C.V. fairly present the company's position in accordance with US GAAP. CEO Paolo Ardoino celebrated the outcome on X Corp, labeling it "the largest initial financial audit in history" and directly addressing years of skepticism surrounding USDT.

However, the issuance of this opinion marks only the beginning of a complex transparency journey, as significant gaps remain regarding the public availability of the full report and the volatility of reserve buffers.

The audit methodology employed by KPMG represented a substantial departure from previous verification processes. Completed on August 13, the review covered the balance sheet, income statement, statement of changes in equity, and cash flow statement. Unlike simple attestation reports, this comprehensive audit required auditors to physically count and inspect each gold bar held by Tether. They also verified transaction records, systems, valuation methods, counterparty information, and the underlying evidence of asset ownership. This rigorous approach ensures that the financial data reflects not just the quantity of assets, but the integrity of the entire reporting framework.

Historically, Tether's path to this verification has been fraught with changes in accounting partners and methodologies. For years, the company relied on quarterly attestation reports prepared by BDO Italy, which confirmed whether reserve assets covered liabilities at specific points in time. This process was akin to taking a snapshot of a safe, checking for sufficient funds without examining their source or flow. Prior to this, Friedman LLP was dismissed in 2017, and MHA Cayman (later part of BDO) was hired in 2021 to handle attestations. In 2024, Tether completed a SOC 2 Type 1 information security audit, and in March 2026, it announced the hiring of a Big Four firm for a comprehensive audit, with PwC assisting in preparing internal systems for compliance.

Despite the completion of the audit, the full report remains inaccessible to the public and media. Tether has not yet responded to inquiries regarding the release of the complete KPMG audit documents. The value of an audit lies not merely in its conclusion but in its detailed notes, explanations of accounting policies, key audit matters, and disclosures of related-party transactions. Without access to these specifics, external analysts cannot independently verify the crucial details that underpin the unqualified opinion. This lack of transparency raises questions about the depth of the verification and the true nature of Tether's financial operations.

The scope of the audit is another critical area of concern. KPMG audited 'Tether International S.A. de C.V.,' which Ardoino stated is the entity responsible for issuing USDT.

However, Tether's corporate structure is far more complex, involving Tether Holdings Limited (registered in the BVI), Tether Operations Limited, Tether Investments Limited, and Tether Gold. In previous BDO attestation reports, assets of Tether Investments Limited were explicitly excluded from the definition of 'reserves.' Whether KPMG's audit scope aligns with BDO's coverage and whether related-party transactions within the group were thoroughly examined can only be determined by reviewing the full report.

Woofun AI data shows that reserve buffer volatility presents a significant risk that the audit does not fully mitigate. KPMG confirmed that reserves exceeded liabilities by $6.814 billion as of the end of 2025. By the first quarter of 2026, BDO's attestation showed this figure rising to around $7.1–$8.2 billion.

However, by the second quarter of 2026, the reserve buffer had dropped to $4.11 billion, a reduction of about 40% since the KPMG audit. This rapid decline highlights the dynamic nature of Tether's reserves and the potential for significant fluctuations in its financial health between audit periods.

Asset composition and associated risks remain a focal point for scrutiny. As of the first quarter of 2026, approximately 80–83% of Tether's reserves consisted of Treasury bonds, 5–7% were overnight reverse repos, and 3–5% were money market funds. Additional holdings included over 146 tons of gold, Bitcoin, and secured loans. Secured loans have long been a concern, with Tether promising to eliminate them by the end of 2023. Yet, as of mid-2024, there were still $5.5 billion worth of such loans. Questions regarding the borrowers, collateral, and concentration of these loans have been poorly addressed in attestation reports, and the full audit should provide more detailed classifications.

The timing and continuity of the audit are also problematic. The KPMG audit covers financial data from eight months ago, during which time the circulation of USDT increased from around $144 billion to over $184 billion, a rise of about $40 billion. For a financial institution with such rapid balance sheet expansion, the timeliness of an annual audit is compromised. Tether has not provided answers on whether it will continue to be audited by KPMG in 2026 or if the frequency will increase to semi-annual or quarterly intervals. This lack of clarity undermines the ongoing relevance of the audit findings.

Regulatory landscape and compliance efforts are evolving rapidly. In July 2025, the U.S. president signed the GENIUS Act, establishing a federal regulatory framework for stablecoins. The act requires compliant issuers to hold 1:1 reserves of cash or short-term Treasury bonds, publish monthly attestations, and undergo annual audits.

However, these requirements do not automatically apply to foreign issuers like Tether, which is headquartered in El Salvador. The Treasury must make a 'reciprocity determination' to recognize the regulatory framework in El Salvador as comparable to that of the United States. As of mid-2026, this determination is still under review. Senator Jack Reed proposed the Foreign Stablecoin Transparency Act to address this gap. In January 2026, Tether launched USAT tokens through Anchorage Digital Bank as a compliant Plan B for the U.S. market. The GENIUS Act provides a three-year transition period until July 2028, after which non-compliant stablecoins will be banned from U.S. trading platforms.

This marks a pivotal moment for Tether, as the KPMG audit confirms its ability to meet strict financial standards. KPMG would not risk its reputation by issuing a false opinion for a financial entity worth $180 billion, recalling the collapse of Andersen due to the Enron scandal. The audit validates that Tether has a substantial buffer exceeding its liabilities, with Treasury bonds dominating its reserve structure and gold holdings verified through physical counting. Ardoino described this as "the beginning of the next journey," emphasizing that the real test begins when the full audit report is made public. The coming months will reveal whether Tether can maintain this level of transparency and compliance in the face of increasing regulatory pressure.