Tether Limited currently has accounts with Cathay United Bank and Hwatai Bank in Taiwan, both of whom are aware and confident that Tethers business model is acceptable. Additional banking partners are being established in other jurisdictions to further mitigate this concern. Our bank could freeze or confiscate the funds Our banks are aware of the nature of Bitcoin and are accepting of Bitcoin businesses. They also provide banking services to some of the largest Bitcoin exchanges globally. The KYC/AML processes we follow are also used by the other digital currency exchanges they currently bank. They have assured us we are in full compliance . 12 We could abscond with the reserve assets 13 The corporate charter is public as well as the business owners names, locations, and reputations. Ownership of the account is legally bound to the corporate charter. Any transfers in or out of the bank account will have the associated traces and are bound by rigid

Recentralization of risk to a single point of failure We have some ideas on how to overcome this and well be sharing them in upcoming blog and product updates. There are many ways to tackle this problem. For now, this initial implementation gets us on the right track to realize these innovations in following versions. By leveraging the platforms we have chosen, we have reduced the centralization risk to one singular responsibility: the creation and redemption of tokens. All other aspects of the system are decentralized. 12 13 See section on Same as footnote #10 Legal and Compliance for more information 11 Main Applications In this section well summarize and discuss the main applications of tethers across the Bitcoin/blockchain ecosystem and for other consumers globally. We break up the beneficiaries into three user groups: Exchanges, Individuals, and Merchants.

The main benefits, applicable to all groups: Properties of Bitcoin bestowed upon other asset classes Less volatile, familiar unit of account Worlds assets migrate to the Bitcoin blockchain For Exchanges Exchange operators understand that accepting fiat deposits and withdrawals using legacy financial systems can be complicated, risky, slow, and expensive. Some of these issues include: Identifying the right payment providers for your exchange irreversible transactions, fraud protection, lowest fees, etc Integrating the platform with banks who have no APIs Liaising with these banks to coordinate compliance, security, and to build trust Prohibitive costs for small value transfers 37 days for international wire transfers to clear Poor and unfavorable currency conversion fees By offering tethers, an exchange can relieve themselves of the above complications and gain additional

With the growing number of insolvency events it can be quite dangerous. As mentioned previously, we believe that using tethers exposes exchange users to less counterparty risk than continually holding fiat on exchanges. Additionally, there are other benefits to holding tethers, explained in the next section.