Offshore stablecoin issuance — BVI-domiciled, BDO attestation (not audit), $174B+ supply, most scrutinized reserves in crypto.
"The customer's bank deposit instruction — fiat value is sourced and ready for conversion."
Customer deposits USD via bank wire to Tether's banking partners (Britannia Financial Group, Cantor Fitzgerald). L4 Account (customer's Tether account) and L5 Application (Tether API / web portal) are lit. KYB gate exists but is opaque — Tether's onboarding process is not publicly documented. HONESTY MARKER: Tether is BVI-domiciled, not US-regulated, and holds no money transmitter license.
"The reserve attestation — an external auditor confirms the 1:1 backing before new tokens are minted."
Tether's reserve is verified via quarterly attestation by BDO Italia only — not a full audit. HONESTY MARKER: attestation ≠ audit. Grant Thornton refused to continue; Tether switched to BDO. No Chainlink PoR or real-time on-chain reserve verification. Reserve composition is controversial: T-bills, secured loans, gold, Bitcoin — not transparent by asset or issuer. This is the key compliance gap. D8 (licensing — offshore, opaque) and D9 (capital requirements — unverified) are active domains.
"The fiat-to-blockchain boundary crossing — value transitions from the banking system onto the blockchain."
The medium boundary crossing: USD in the banking system becomes USDT on TRON (primary — 50%+ of supply, low fees, high volume in EM corridors) or Ethereum. L4 Account (customer balance update), L3 Execution (mint contract), and L2 Consensus (block inclusion) are lit. This is where money transmission licensing fires. TRON block time is ~3s, Ethereum ~12s. The compliance surface is distinct from any on-chain swap. US persons are technically restricted (Tether ToS) but enforcement is minimal — exposure remains.
"The customer's updated digital-asset balance — USDT received and available for transfer."
Newly minted USDT arrives in the customer's wallet on TRON or Ethereum. L4 Account and L5 Application lit. Recordkeeping (D11) and tax reporting (D12) obligations fire. The customer now holds USDT backed by Tether's opaque reserve. HONESTY MARKER: USDT can be frozen by Tether (address blacklist), but the process is less transparent than Circle's. GENIUS Act would require Tether to register as a 'permitted payment stablecoin issuer' — open question whether offshore issuers can comply.
Resolved 4 steps across 1 chain(s). 0 threshold(s) triggered. Frameworks: Common Reporting Standard / FATCA.
Coverage notes: 5 disclosed gap(s).