Tether Reduces its Holdings of Commercial Paper by 58%

Key Takeaways:

  • Tether, a stablecoin issuer, has decreased its commercial paper holdings by 58 percent to $8.5 billion, and at the end of the month, it expects a further decrease to $3.5 billion.
  • This action is being taken as tether attempts to quell rumours regarding the level of support for its USDT token, which is pegged to the dollar.
  • In May, the business had $20.1 billion in commercial paper.

The largest stablecoin in the world, Tether, announced on Friday that it had reduced its exposure to riskier assets by about 58 percent by selling off a portion of its holdings of commercial paper.

Of these 8.4 billion currently held by Tether, 5 billion will expire on July 31. In line with Tether’s commitment to the community, this will lead to a significant decline in commercial paper assets to a low of 3.5B. The objective is still to reduce the number to zero. Despite the fact that treasury reserves and commercial paper are both widely held liquid assets and cash substitutes, U.S. treasuries will now account for a larger portion of Tether’s reserves.

Commercial paper is unsecured short-term debt that businesses issue. The businesses that issue it determine its worth. There have been rumours about Tether’s holdings, raising doubts about how much support the company can rely on for USDT.

Concerns about Tether’s financial ties to other cryptocurrency companies were raised last month when it was revealed that it had no exposure to Three Arrows Capital, the hedge fund that was allegedly insolvent. A holdings attestation by independent accountants MHA Cayman was published by Tether in May. According to the report, Tether held Treasury bonds worth $39.2 billion.

Tether, however, had fallen below its 1:1 peg to the dollar in May before bouncing back, a fall that had shocked the industry. This is a component of a larger plan to guarantee that Tether has a diversified portfolio with minimal exposure to particular assets or issuers. As part of its ongoing effort to boost transparency for the stablecoin industry, which was proudly founded by Tether in 2014, it shows the company’s commitment to reducing its investments in commercial paper and validates the business.

Tether released a statement on June 15 to deny rumours that 85% of that portfolio was Asian and Chinese commercial paper trading at a significant discount, two days after cryptocurrency lending platform Celsius announced it was stopping withdrawals. Tether declared at the time that it wanted to get rid of all of its commercial paper holdings. A few days later, the USDT market cap dropped to below $70 billion, an eight-month low.

Chief Technology Officer of Tether Paolo Ardoino quickly allayed any worries, calling the report on hedge funds shorting USDT “FUD”

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Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

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