Tether Reducing Corporate Debts In Reserves And Holds Most In US Treasuries

By Kevin • May 14, 2022 12:42 pm • Comments

Tether has just announced that it has been reducing its holdings of commercial debt within its reserves for the past six months during a time when stable coins are now under scrutiny by lawmakers.

Instead of holding debt, the company’s executives have revealed that Tether is now allocating most of its reserve in US treasuries.

Tether has been criticized for a while now on whether or not the company actually has the reserves to back up the USDT token with several organizations calling for a public audit.

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According to the data, the last quarter of last year showed that commercial papers made up roughly 33% of Tether’s total holdings which was down from 44% in the previous quarter.

Tether had also reduced its cash assets from $7.2 billion to $4.2 billion which was a pretty significant change.

FinanceFeeds reports:

As part of its settlement with US regulators last year, Tether is required to release quarterly attestations of its assets and liabilities in order to be more transparent with its token holders over what exactly backs its stablecoin.

The new disclosure comes as the meltdown in other stablecoins rippled through cryptocurrency markets and pushed USDT itself below its dollar peg. Tether’s coin dropped to as low as 95 US cents yesterday, but then recouped losses and was last traded at 99 US cents, according to CoinMarketCap.

In October 2021, Bloomberg ran an article titled “Anyone Seen Tether’s Billions?” claiming that Tether invested billions of dollars in short-term loans in large Chinese companies – including Evergrande, which is facing one of the world’s largest-ever defaults.

Tether issued a response to the surfaced report on the company’s website. It denied the findings of Bloomberg’s paper, even accusing the author and its sources of unethical motivations.

Tether continues to claim that it is able to back up each of its tokens 1 to 1 with the US dollar in order to make sure that the value of USDT is always tied to the value of a dollar.

Volatility within the crypto markets has affected the price of Tether recently and in past years as well during times of market crashes.

Typically, the price of Tether during such times had struggled to stay close to the $1 mark and had strayed as far as 97 cents in the past week at its lowest point.

During the crypto crash back in 2017, the price of Tether had went down to around 92 cents as well showing that times of increased market volatile can heavily influence the current price of the stable coin before it recovers back to $1.

DeCrypto.co reports:

Tether’s latest formal attestation indicates that cash, cash equivalents, short-term deposits, and commercial paper make up 83.74% of all the Tether circulating on the market.

Of that figure, nearly 37% is made up of commercial paper and certificates of deposit. Treasury bills make up roughly 52%.

The 37% figure is from December so, in light of Ardoino’s comments about a 50% reduction over six months, it’s unclear if Tether’s commercial paper holdings are now around 18.5% or some other amount.

Tether is famously opaque about its operations, and has repeatedly refused to subject itself to a public audit by a major accounting firm.

From an overall perspective, this is one of the growing pains of the crypto industry and recent events are pressuring lawmakers to tighten regulations.

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