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The world’s largest stablecoin, Tether, completed a significant milestone today, announcing that it had slashed its commercial paper holdings to zero. According to a blog post, the commercial paper holdings have been replaced by U.S. Treasury bills.
The move sees $30 billion of commercial paper removed from the stablecoin’s reserves.
A Significant Milestone
Tether has announced that it has completely removed commercial paper from its reserves. The announcement is significant since it means the stablecoin has removed $30 billion worth of commercial paper from its reserves. Tether had previously committed to reducing its commercial paper holdings and has done so, gradually removing them before today’s announcement.
Tether issues USDT, the world’s most traded crypto asset and largest stablecoin, has come under some criticism from regulators. This is because of the lack of clarity around its reserves and what it consists of. Tether has stated that today’s announcement will help it achieve the required levels of transparency. Tether announced on Twitter,
“Tether is proud to announce that we have completely eliminated commercial paper from our reserves. This is evidence of our commitment to back our tokens with the most secure, liquid reserves in the market. Tether has eliminated over $30 billion of commercial paper without any losses, proof of how Tether’s reserves are conservatively and professionally managed. Tether has also increased its direct exposure to U.S. Treasuries by more than $10 billion in the last quarter.”
Ongoing Effort To Increase Transparency
The move to remove commercial paper comes against the backdrop of increased calls for better transparency. Additionally, Tether has gone on record stating that it was looking to improve the quality of its reserves. The company stated in its blog post,
“This announcement comes as part of Tether’s ongoing efforts to increase transparency, with investor protection at the core of the management of Tethers’ reserves. Reducing commercial papers to zero demonstrates Tether’s commitment to backing its tokens with the most secure reserves in the market.”
Data has shown that there are over 68 billion USDT in circulation, a significant increase from three years ago. Earlier this year, rumors swirled around the makeup of Tether’s reserves, speculating that Chinese and Asian commercial papers backed a portion of Tether’s commercial paper reserves. Tether denied these rumors, stating that they were fabricated to create further panic in an already stressed market.
Tether’s Trust Issues
Tether has had several run-ins with regulators in the past. Last year, the company had to pay a multimillion-dollar fine following a legal tussle with the New York attorney general’s office. This was after regulators raised concerns about the viability of the stablecoin issuer’s reserves. The collapse of Tether also had a significant impact on the market, with investors losing billions due to the collapse.
The collapse resulted in a domino effect, with other stablecoins, including Tether, losing their peg to the dollar. Tether has claimed that all of its tokens are backed 1:1 by dollars held in reserve. However, the settlement with the New York AG’s office revealed another picture. Under the settlement, Tether disclosed that it relied on various other assets, including commercial paper, to support the stablecoin.
Tether’s Chief Technology Officer, Paolo Ardoino, has previously stated that the company is prepared for any amount of redemptions. However, New York AG Letitia James at the time contended that Tether had, at times, no reserves to back its dollar peg, adding that the company had no access to banking from mid-2017 and had misled clients about its liquidity issues. Critics have also alleged that Tether tokens were used to manipulate Bitcoin, a claim the company denies.
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