Tether says commercial paper slashed, replaced with US Treasury bills

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Teth­er, issuer of the world’s largest sta­ble­coin, said in a blog post it has cut its com­mer­cial paper hold­ings to zero and replaced them with U.S. Trea­sury bills.

See relat­ed arti­cle: Are sta­ble­coins like Teth­er ready for reg­u­la­to­ry scrutiny? 

Fast facts

  • Teth­er is the issuer of sta­ble­coin USDT, a token that claims to have a 1:1 peg with the U.S. dol­lar. Due to a Feb­ru­ary 2021 set­tle­ment with the New York State Attor­ney Gen­er­al, Teth­er is required to issue quar­ter­ly reports on its reserves, and the report exposed that it had about 50% reserve backed by com­mer­cial papers, which is con­sid­ered as a high-risk asset.
  • Teth­er start­ed slash­ing its com­mer­cial paper in Sep­tem­ber 2021.
  • Sta­ble­coins are cryp­tocur­ren­cies whose val­ue is pegged to that of an under­ly­ing asset, such as the U.S. dol­lar, by hold­ing assets equiv­a­lent or greater than the cryp­tos’ total mar­ket cap. USDT has a mar­ket cap­i­tal­iza­tion of about US$68 bil­lion, accord­ing to Coin­Mar­ket­Cap.
  • Trea­sury bills are per­ceived as being more sta­ble than com­mer­cial papers, which are short-term debt prod­ucts that com­pa­nies issue to increase financing.
  • Teth­er said in its blog post the move is a step toward “greater trans­paren­cy and trust.” 
  • In Feb­ru­ary 2021, Teth­er reached an US$18.5 mil­lion set­tle­ment and month­ly reserve dis­clo­sure with the U.S. Attor­ney Gen­er­al of New York State, as the lat­ter sued the for­mer with insuf­fi­cient reserves to sup­port the stablecoin.

See relat­ed arti­cle: SEC fines for­mer Teth­er audi­tor over account­ing malpractice 

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