How to read stablecoin reserve reports without taking the issuer's word

You hold USDT or USDC and want to know if the dollar backing it is really there. The issuer publishes a glossy PDF every month or quarter calling it an "attestation." The question worth asking before you trust that PDF: what did the accountant actually check, and what did they just take the issuer's word on?

What does an attestation actually verify

An attestation is not an audit. That distinction does the most work in this whole topic. An audit tests internal controls over time and gives an opinion on whether financial statements are fairly presented. An attestation, specifically the "agreed-upon procedures" (AUP) reports issuers commission, only confirms that on one specific date, assets of a certain value existed in accounts the issuer named. The accounting firm does not verify that those are the only accounts, does not test whether the issuer had matching liabilities correctly recorded, and does not opine on internal controls.

Tether's reports from BDO and Circle's reports from Deloitte are both AUP engagements, not audits. Circle's own reserve report page states this directly, listing monthly attestations rather than an annual audit. Read the cover letter first. If it says "we were not engaged to and did not conduct an audit," that sentence tells you the scope before you even reach the numbers.

Which line items should you actually check

Skip the summary paragraph and go to the composition table. Three numbers matter more than the headline "over-collateralized" claim:

1. Cash and cash equivalents vs. everything else. Tether's Q1 2024 report showed roughly 90% of reserves in cash, reverse repo, T-bills, and money market funds, with the remainder in secured loans, corporate bonds, precious metals, and other investments including bitcoin. That "other investments" bucket is where risk hides. A report showing 100% in T-bills and cash at a named custodian is a different risk profile than one with 5% in undisclosed secured loans.

2. Custodian names. A real attestation lists the specific banks and money market funds holding the assets, ideally with dollar amounts per institution. If the report says "held at various financial institutions" without naming them, you can't check concentration risk. USDC's reports name BlackRock's Circle Reserve Fund and specific custodian banks, which lets you cross-check fund holdings independently through SEC filings.

3. The date, not the average. Every report is a snapshot, usually the last day of the month or quarter. Reserves fluctuate daily with redemptions and issuance. A clean snapshot on March 31 tells you nothing about March 15. This is why these reports catch balance-sheet window dressing worse than a continuous audit would.

What's the catch with self-selected accounting firms

Issuers hire and pay the accounting firm doing the attestation. The firm's engagement letter defines the procedures, and the issuer negotiates that scope. This is standard practice, not evidence of fraud, but it means the firm tests only what it was asked to test. Tether went through several accounting firms (Friedman LLP, then Moore Cayman, then BDO) before settling on its current arrangement, and each transition came with limited public explanation. When an issuer changes its attestation firm, that's worth noting even if the new report looks cleaner.

Compare this to a full financial statement audit under GAAP or IFRS, which requires testing internal controls, sampling transactions across the whole period, and issuing a formal opinion the auditor can be held liable for. No major stablecoin issuer currently publishes one. That gap is the single biggest thing separating "reserve report" from "proof of solvency."

What should you check before trusting the number

Read the accounting firm's cover letter for the words "attestation" versus "audit," and note whether it disclaims an opinion on internal controls. Check whether custodians and fund names are specified or generalized. Look at the percentage breakdown between cash-equivalents and other investments, and ask what's in "other." Note the report date and remember it's a single day, not a running balance. Finally check the cadence: monthly attestations catch problems faster than quarterly ones, and a issuer that skips a period or changes accounting firms without explanation is telling you something even if the numbers on the page look fine.