In a recent blog post, Tether, which is the largest stablecoin in the world, announced that it had gotten rid of its commercial paper holdings, replacing them with US Treasury bills instead. Tether said that the move was part of its continuous efforts to increase transparency in order to protect investors more effectively, as well as to back its tokens with the most secure reserves in the market.
Tether has led the industry in transparency releasing attestations every three months, constantly reviewing the make up of its reserves.
The blog post said
The commercial paper market involves short-term, unsecured debt issued by companies, which is considered less reliable than Treasury bills. Paolo Ardoino, Tether’s Chief Technology Officer, tweeted in October that 58.1% of its assets were held in T-bills, up from 43.5% in June. While it’s unclear where that percentage currently stands, Ardoino wrote on Thursday that Tether paid $7 billion, or 10% of its reserves, in 48 hours.
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.
The blog post said
A legal battle with New York’s attorney general’s office last year resulted in Tether having to pay a multimillion dollar fine regarding concerns related to the viability of its reserves, while in May, terraUSD (UST), once one of the most popular stablecoin projects, collapsed, costing investors tens of billions of dollars.
Tether previously claimed that all its tokens were backed one-to-one by bank deposits. Following a settlement with the New York Attorney General, the company revealed that it relies on a range of other assets, including commercial paper, in order to support its token.
It was reported earlier this year that a portion of Tether’s commercial paper portfolio was 85% backed by Chinese or Asian commercial papers and was being traded at a discount of 30%. According to Tether, the rumors were fabricated in order to generate additional profits from an already stressed market by inducing further panic.
In a report released last week, the Financial Stability Oversight Council (FSOC) warned that cryptocurrencies, including stablecoins, could represent a significant vulnerability to traditional markets if they continue to grow.
