The world’s largest stablecoin, Tether (USDT), has slashed its commercial paper holdings to zero and replaced it with U.S. Treasuries, saying it was part of Tether’s “continued drive to improve transparency” and was ” the safest in the world ” “Reserve Fund” as Tether’s guarantee, the purpose is to allow investors to obtain protection.
According to CoinMarketCap, there are now about 68.4 billion USDT in circulation, up from 2 billion three years ago. Tether issued a statement saying:
Tether leads the industry in terms of transparency through a certificate published every three months (reserve report), which
continuously reviews the composition of its reserves.
Commercial paper, an unsecured, short-term debt financial instrument issued by corporations, is less reliable than U.S. Treasuries.
In October, Tether Chief Technology Officer Paolo Ardoino tweeted that 58.1% of USDT’s assets were in Treasury bills (T- bills), up from 43.5% in June. The latest Treasury bill ratio is not known, but Ardoino said in a post on Thursday that Tether was able to pay $7 billion in 48 hours, or about 10% of its reserves.
The latest statement pointed out that bringing commercial paper holdings to zero also represents a further step towards greater transparency and trust for USDT and the entire stablecoin industry.
The stablecoin space of the cryptocurrency market has had trust issues in the last year. Tether was forced to pay millions of dollars in fines last year after the New York Attorney General’s Office raised concerns about the reliability of its reserves, and both parties entered a lawsuit; in May, the once-last-welcome algorithmic stablecoin TerraUSD (UST) collapsed , dragging investors down tens of billions of dollars.
The collapse of the UST led to a domino effect across the cryptocurrency ecosystem, some of which included Tether temporarily losing value against the dollar, at one point dropping to 95 cents. But the reserves held by Tether’s namesake company were already facing major regulatory issues long before the dramatic collapse of the UST.
Most stablecoins use fiat currency as a reserve, which allows users to have sufficient collateral when they decide to withdraw funds or run a run . Algorithmically maintains price parity with USD.
Tether previously claimed that all USDT was backed 1:1 by U.S. dollars held in banks, but following the New York Attorney General’s settlement, the company revealed it was relying on a range of other assets, including commercial paper, to back its tokens.
Paolo Ardoino said in April that Tether was capable of handling large-scale redemptions, but the office of New York Attorney General Letitia James accused Tether that it sometimes did not have the reserves to back the peg to the dollar. Starting in mid-2017, it was unable to deal with banks while misleading customers about liquidity, the company said.
” Tether’s claim that its virtual currency is always fully backed by U.S. dollars is a lie, ” Letitia James said at the time .
Tether stated on its website that the fact is contrary to speculation. ” After two and a half years, it has never been found that Tether has ever issued unsecured USDT or manipulated currency prices.”
Carol Alexandre, a professor of finance at Sussex University, said that while Tether is not big enough to pose a threat to the U.S. currency market, the size of Tether’s U.S. debt holdings could be quite staggering:
Assuming this continues, not $80 billion, but $200 billion, most of which are liquid U.S. government securities. Well, if Tether collapsed, it would have a major impact on the U.S. currency market,
and it would send the entire world into a recession.