Tether Commercial Paper Reserve

USDT issuer Tether is shifting its reserves from commercial paper to low-risk U.S. treasury bills.

The USDT stablecoin issuer Tether announced its plans to slash its commercial paper portfolio by $5 billion by the end of July 2022. This will lower its paper asset holdings from $8.4 billion to $3.5 billion. The development follows Tether’s earlier announcement that it had cut its paper reserves on May 19. The decision forms part of the company’s goal to bring its paper asset holdings down to zero and raise its share of U.S. treasuries. 

USDT is the world’s biggest stablecoin with a market capitalization of approximately $66.5 billion. The USDT stablecoin is a crypto-asset developed to maintain a 1:1 ratio with the price of the US dollar. Tether claims USDT is 100% backed 1:1 with reserves, implying that token holders should always be able to redeem their coins for dollars without a problem. Amidst the Tearra collapse, USDT momentarily lost its peg to the dollar, but Tether continued to honor redemptions amid the event. It recovered its dollar peg within a few days. 

Tether has been the subject of several rumors over the years regarding the state of its reserves. Critics argue that the stablecoin issuer could someday suffer a bank run event, to which Tether has responded by issuing numerous statements in a bid to improve its transparency. Tether promised to do a full audit of its reserves but is yet to deliver on that promise.

Currently, commercial paper, cash, and short-term deposits form 85.64% of Tether’s holdings, corporate bonds, funds, and precious metals make up 4.52%, secured loans make up 3.82%, and other assets including digital tokens account for the remaining 6.02%.

Last week, Tether CTO Paolo Ardoino came out week to declare that multiple crypto firms were attempting to short USDT, betting on the stablecoin losing its dollar peg. The coin continues to defy critics and has held strong. The company has also announced plans to introduce more stable coins including another pegged to the British pound.

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