Since tether briefly dropped from its dollar peg, investors have pulled more than $7 billion from it.
The circulating supply of tether has fallen from about $83 billion a week ago to less than $76 billion on Tuesday.
The stable coin is meant to be worth $1. Its price fell as low as 95 cents on Thursday due to panic over the collapse of a rival token.
Most stablecoins are backed by the government's reserves, which are meant to be used in case users decide to withdraw their funds. A new breed of stable coins attempt to base their dollar peg on code. That has been put to the test recently as investors soured on cryptocurrencies.
Tether claimed that it was backed by dollars stored in a bank. After a settlement with the New York attorney general, the company revealed it relied on a range of other assets.
The subject of the reserves has once again been put under the microscope. Cash made up over $4 billion of the assets when the reserve breakdown was disclosed. The majority of the money was in Treasury bills with maturities of less than three months.
MHA Cayman, a firm with only three employees, signed off on these tests, according to its LinkedIn profile.
There have been calls for a full audit of the reserves. The company told CNBC in July that it would produce one in a matter of months.
When contacted by CNBC, tether was not available for comment.
On either side of the Atlantic, regulators have been rattled by the destabilization of token prices. Last week, the U.S. Treasury Secretary warned of the risks of financial stability if stablecoins are left to grow unfettered by regulation, and urged lawmakers to approve regulation of the sector by the end of the year.
The Governor of the Bank of France said that the recent turmoil in theCryptocurrencies should be taken as a wake-up call for global regulators. Villeroy said that Cryptocurrencies could disrupt the financial system if left unregulated.
The European Central Bank's Executive Board Member said stable coins are vulnerable to runs, where clients flee a financial institution en masse. The European Union is planning to bring strict regulatory oversight to stable coins.
Retail investors are not pulling billions of dollars out of Tether in wholesale transactions, as explained by an independent economist. To redeem tethers for dollars on tether, clients must make a minimum withdrawal of $100,000, according to the company's website.
The exchanges sell token to traders and small investors.
Billions of dollars worth of trades are made with tether every day. During times of heightened volatility in cryptocurrencies, investors often park their cash with the token.
Monsur Hussain, head of financial institutions research at Fitch Ratings, said that Tether would be able to sell its Treasury holdings.
The market values of Circle'sUSDC and BUSD have increased by 8% and 4% in the past week, as anxiety surrounding tether appears to have boosted demand. The experts said that these are safe than tether.
Carol Alexander, a professor of finance at Sussex University, said that tether could eventually reach a size where its owning of U.S. Treasurys becomes really scary.
She said that if we went down the line and got $200 billion, most of it was in liquid U.S. government securities.
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