The world’s largest stablecoin, Tether, has announced the reduction of its commercial paper holding by more than 50%.
According to available information, the stablecoin issuer cut its commercial paper holdings from over $20 billion to around $8.5billion, of which $5 billion would expire by July 31. This means that its commercial paper holding would be just $3.5 billion by the end of this month.
The decision was made to address the speculation surrounding the backing of its USDT token across the industry.
A statement on the firm’s website indicated that its long-term goal is to further cut the figure to zero in a bid to successfully diversify its holdings into U.S. Treasury bonds.
The importance of this move is essential when placed into the context of how commercial papers are basically short-term unsecured debt issued by companies. Generally, the value of these papers is largely dependent on the optics of the company that issues them.
Questions Surround Tether’s Reserve
In the case of Tether, speculations surrounding its reserve holdings increased immensely on the back of Terra’s UST crash.
Last month, the company had to issue a public statement to dispute claims that it was exposed to crisis-hit Three Arrows Capital, a hedge fund on the brink of insolvency, and embattled crypto lending platform Celsius Network.
Meanwhile, its CTO Paolo Ardoino, in a Twitter thread addressed hedge funds who were shorting the stablecoin in the hope of a collapse.
According to him, these FUDs would only strengthen the stablecoin.
This commercial paper holding slash is also coming at a time when Tether is experiencing a significant fall in its market cap.
As of April 2022, Tether’s market cap was over $82 billion. However, that figure has now fallen by almost $20 billion as it currently hovers around $66.1 billion.