There is little sign of stress in USDT itself, so the direct market effect is likely to be minimal unless the exposure turns out larger than Tether has indicated. The story adds to a week already heavy with counterparty worries, coming a day after Bitget's hack, and may renew scrutiny of which banks stablecoin issuers use. Smaller offshore banks that serve crypto firms could face tougher questions from clients and regulators. For traders, the practical signal to monitor is USDT's price against the dollar: any sustained move away from $1 would matter far more than the headline.---Tether's EQIBank exposure is a rounding error on its balance sheet, but it is a useful reminder that a stablecoin is only as safe as the banks holding its reserves.Summary:Confirmed: Tether says it has funds at EQIBank, a Dominica-licensed offshore bank facing possible liquidation. The Information reported it first, on 24 September.Size of exposure: Tether says it is less than 0.034% of its total assets, under $64 million based on its Q2 reserves report. It has not disclosed the exact amount.The seizure: US authorities seized about $89 million linked to EQIBank, held through accounts at US payment processor Capstone Ltd. A forfeiture complaint filed in July seeks $84.2 million.The bank's position: EQIBank says the seized funds are about 80% of its cash holdings. It warned on 9 September that it could be forced into liquidation, and it is challenging the seizure in a California federal court.Recovery: Tether says the impact on its reserves will be limited, but what it gets back depends on any liquidation proceedings.Market reaction: USDT has held its $1 peg.Tether, the company behind the world's most widely used stablecoin, has confirmed it has money stuck at EQIBank, a small offshore bank that has warned it could be forced into liquidation after US authorities seized most of its cash. Tether says the exposure is tiny, less than 0.034% of its total assets, or under $64 million based on its latest quarterly reserves report. The episode was first reported by The Information on Thursday.For readers new to crypto, some background helps. Tether issues USDT, a stablecoin, which is a digital token designed to always be worth one US dollar. To keep that promise, Tether holds reserves, a pool of cash, government bonds and other assets meant to back every token in circulation. Some of that cash has to sit in bank accounts, and this story is about what happens when one of those banks gets into trouble.EQIBank is licensed in Dominica, a small Caribbean island nation. US authorities seized about $89 million linked to the bank, held through accounts at a US payment processor, Capstone Ltd. Prosecutors filed a forfeiture complaint in July seeking to keep $84.2 million of it permanently, and EQIBank is fighting in a California federal court to get the money back. The bank says the seized funds make up about 80% of its cash holdings, and it warned on 9 September that losing them could push it into liquidation, the legal process of winding down a failed business and paying back creditors from whatever is left.Tether has not said exactly how much it holds at EQIBank. It says any impact on its reserves overall will be limited, but acknowledged that how much it eventually recovers depends on how any liquidation plays out. In a liquidation, depositors can wait a long time and may get back less than they put in.The market has so far taken Tether at its word. USDT was trading at about $0.9997 early on Friday afternoon in Asia, essentially unchanged from its one-dollar peg, which suggests traders see this as a contained problem rather than a threat to Tether's ability to back its tokens.The bigger lesson is about counterparty risk, which simply means the risk that someone you rely on fails to deliver. A stablecoin is only as solid as the assets behind it and the institutions holding those assets. Relative to Tether's size, one small bank failing looks manageable. But the case is a reminder that stablecoin holders do not have the deposit protection that comes with an ordinary bank account, and that reserve reports show what an issuer holds, not always where it holds it or how quickly it can reach it.What to watch next is whether EQIBank formally enters liquidation, and whether the California court returns any of the seized funds. Any disclosure from Tether of the exact amount at risk, or a note on it in its next reserves report, would also help. A court win for EQIBank would likely end the matter quietly. A formal liquidation would turn Tether into a creditor waiting in line, though at this scale it would not threaten USDT's backing. This article was written by Eamonn Sheridan at investinglive.com.