Tether Reduces Its Commercial Paper Holdings To Zero

Tether Reduces Its Commercial Paper Holdings To Zero

October 15, 2022

In a tweet on October 13, stablecoin issuers Tether announced that it had reduced its commercial paper holdings to zero to ensure secure and liquid reserves for Tether USD (USDT).

“Tether is proud to announce that we have eliminated commercial paper from our reserves,” said Tether in its tweets. “This is evidence of our commitment to back our tokens with the most secure, liquid reserves in the market.”

The shared blog post reveals that the firm replaced its commercial paper holdings with US Treasury bills. As part of the Twitter thread, it is revealed that Tether increased its Treasury bill exposure by $10 billion in the last quarter alone. Notably, the firm claims that it eliminated its over $30 billion of commercial paper exposure without taking any losses.

It is worth noting that Tether’s reserves have been a focal point of controversy in the past five years. Despite previous claims by Tether that it had a 1:1 dollar backing, following a legal battle with the New York Attorney General’s Office last year requiring it to submit quarterly reports, it was revealed that the company held a variety of different assets, including commercial papers.

Commercial papers are short-term unsecured debts offered by private companies, thought to hold considerably more risk than Treasury bills.

Tether and its sister company Bitfinex paid over $60 million in settlements to the New York Attorney General’s Office and the US Commodity Futures Trading Commission over misleading information about USDT’s backing last year.

Since then, the company has steadily reduced its commercial paper holdings to foster greater investor trust. Notably, Tether CTO Paolo Ardoino, in August, had asserted that by the end of October, the firm would reduce the holdings to zero, and the firm claims to have done just that with the end of the month still weeks away.

Tether discloses that at the end of September, its commercial paper holdings had dropped to just $50 million. It bears mentioning that in August, the firm tapped the top 5 accounting firm BDO to attest to its reserve holdings as part of its push to retain user trust.

However, despite this and the latest announcement that it has reduced its commercial paper holdings to zero, some naysayers still believe that these claims need to be supported by a full audit. Notably, there is still no exact date for the firm to release a full audit, with Ardoino stating in August that it was still months away, as per a Wall Street Journal report.

Tether has managed to reclaim its dollar peg despite reported heavy shorts due to fear, uncertainty, and doubt (FUD) following the TerraUSD de-pegging in May. Notably, despite earlier predictions that USD Coin (USDC) would surpass USDT in market share, USDT remains the largest stablecoin with a capitalization of $68.4 billion.

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