Tether's Funds Frozen at Licensed Digital Bank EQIBank in Dominica
Tether, the issuer of stablecoins, has had its funds frozen at EQIBank, a licensed digital bank in Dominica. According to The Information, the bank is fighting to recover approximately $90 million that was seized from its U.S. payment channel accounts; Tether claims the related exposure is less than 0.034% of its assets, amounting to less than $64 million based on the second quarter reserve report.
EQIBank has filed a lawsuit against the U.S. government in the Eastern District of California, seeking the return of approximately $89 million in seized property. Records from OffshoreAlert show that the U.S. has seized about 80% of the bank's monetary assets, and the bank has warned it may enter liquidation. The bank was founded by British lawyer Jason Blick and Christopher Burke, who holds dual nationality in the UK and Canada; Blick also founded the Cayman Islands Economic Zone operator Cayman Enterprise City.
The seizure occurred after EQIBank accessed the U.S. dollar clearing system through a U.S. payment service provider, leading to the freezing of funds in the related accounts. The bank submitted a motion for return on June 29; there is also a civil forfeiture complaint against approximately $84.2 million under Capstone, as well as existing litigation against the bank in the U.S. for securities fraud. While the bank holds a license in Dominica, its dollar liquidity flows through U.S. channels, and once assets are seized, the local license cannot hedge against liquidation risks.
Tether's second-quarter BDO audit shows total assets of approximately $187.75 billion and liabilities of about $183.64 billion, with excess reserves dropping from $8.23 billion in the first quarter to $4.11 billion. The company states that EQIBank's exposure is less than $64 million, which is a marginal deposit compared to over $100 billion in treasury holdings, but it indicates that stablecoin reserves still require offshore banks and payment intermediaries to facilitate fiat transactions.
In market mechanics, the offshore bank's dollar channel is sold, while the enforcement seizure rights are bought. The beneficiaries are the U.S. prosecutors and payment clearing networks that can cut off the intermediary banks, while the pressured parties are stablecoin issuers that keep reserves scattered in small offshore banks. Funds flow from EQIBank customers and Tether deposit accounts to the seized government-controlled accounts; if the bank goes into liquidation, the remaining 20% of assets will be distributed among creditors, and Tether's $64 million cap is merely an accounting figure that does not address the issue of the channel itself being dismantled.
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Tether has long placed most of its reserves in U.S. treasuries and repos, with year-end figures showing direct holdings exceeding $122 billion and total treasury exposure over $141 billion, while cash and bank deposits have been minimized. Offshore banks only handle fiat inflows and outflows along with minimal operational deposits; institutions like EQIBank with Dominican licenses exist to evade scrutiny from traditional correspondent banks. Once the gap is torn open by U.S. seizures, the issue is not whether $64 million is bearable, but how many channels remain.
The capital path remains: users exchange fiat for USDT, Tether buys corresponding dollars in treasuries to earn interest spreads, with profits retained by the company and not distributed to token holders. Bank deposits are meant for redemptions and transfers, not as profit engines. Once intermediary payment providers are investigated, deposits shift from "callable cash" to litigation targets, with redemptions still relying on treasury liquidation, but the last mile for fiat becomes narrower.
Similar structures were seen when Signature and Silvergate exited crypto clearing in 2023, leading stablecoin issuers to turn to Cantor Fitzgerald for treasury custody; Circle has also placed more reserves into regulated money market funds to reduce bank point risks. Tether remains in a "core treasury + offshore edge" phase; if edge banks fail, it does not automatically break the peg but will increase redemption friction and compliance costs.
Structural judgments belong to regulatory changes. Stablecoins can transfer on-chain, but the reserves in dollars must pass through the U.S. clearing system; seizures occur in payment channels rather than smart contracts, indicating that pricing power lies with correspondent banks and prosecutors, not in issuance terms. The mechanism is that 80% of assets being seized is enough to empty an offshore bank, while 0.034% is merely a footnote for Tether; both exist simultaneously due to asymmetric risks—banks can fail, while token issuers only need to switch to the next channel.