Fake Tethers under fake bitcoins. It's an illustration of what may be happening (Photo via Shutterstock).

A Puerto Rico-based startup bank is said to be struggling to survive and that could have repercussions in the cryptocurrency markets.

Noble Bank is trying to keep afloat and has been frantically searching for funding, according to two highly placed sources, including one at a large cryptocurrency exchange. The bank, with a large chunk of assets coming from Tether’s U.S. dollars, is said to have reached out to at least one large holder of the “stablecoin” in hopes of getting a cash lifeline, but the solicitation was rejected. The source would not elaborate on the size of the request.

“If Noble doesn’t get cash soon, they will only have a few days left,” said one source familiar with the matter to Modern Consensus. “They’re desperate.”

[We reached out to Noble Bank for comment but have yet to hear back. Check here again for updates.]

Meanwhile, Tether itself may be having troubles of its own. A top person at a major trading crypto desk has told Modern Consensus that one counterparty has been trying to unload “tens of millions of tethers” without successfully finding a counterparty.

This comes at a time when new, more aboveboard stablecoins are threatening Tether. Two new dollar-backed coins—issued by Gemini and Paxos, respectively—were recently launched. These new coins have the added benefit of being audited and regulated by the New York Department of Financial Services. Tether lost its auditor, Friedman LP, back in January and claims it’s impossible to be audited (another stablecoin, launched by Circle, isn’t regulated by New York’s DFS even though Circle itself is).

Noble has been serving as one of Tether’s banks for several months but the relationship predates either company. CEO John Betts previously worked with Tether cofounder Brock Pierce several years ago at an outfit called Sunlot Partners.

Since August, more than half of all bitcoins traded against another currency has been against tether, according to data compiled by Cryptocompare.

Tether is one of the most controversial coins on the market today. Though Tether’s tokens are supposed to be backed 1-to-1 to the U.S. dollar, some speculate that the company has been issuing un-backed tethers and using them to buy cryptocurrencies.

In April 2017, Wells Fargo cut off banking from Tether and sister company Bitfinex, one of the world’s largest bitcoin exchanges. Shortly thereafter, tethers began flooding the market. About $2 billion worth of tethers were issued in 2017. Bitcoin’s prices soared simultaneously to Tether’s supply, and one academic study suggests Tether has been used to manipulate Bitcoin prices.