Tether Reduces Commercial Paper to 3.7B, Denies Chinese Links

Paigambar Mohan Raj
Source: Financial Times

Tether’s reserves have been a source of debate for some time now. In June of this year, Tether was accused that Chinese or Asian commercial papers backed 85% of its commercial paper portfolio. Additionally, the papers were reportedly trading at a 30% discount. However, Tether denied these claims via an official blog post in June.

They stated,

“…over 47% of total USD₮ reserves are now US Treasuries and that commercial paper makes up less than 25% of USD₮’s backing.”

Regardless, Tether has now announced that they have reduced its commercial paper holdings from 30 billion in July 2021 to a measly 3.7 billion. The firm also reiterated that they do not hold any Chinese commercial paper.

Moreover, the biggest stablecoin issuer has plans to further reduce its commercial paper holdings to 200 million by the end of August 2022. And by late October or early November, they plan to have none.

Nonetheless, the firm has assured its investors that the company continues to have a diverse portfolio. It also mentions that it limits exposure to individual issuers or assets.

How did Tether reduce its commercial paper holdings?

In the June blog, the company revealed that it had reduced its commercial paper holdings to 11 billion, from 20 billion at the end of Q1 2022. They planned to reduce this number to 8.4 billion by June. Going by the looks of it, Tether seems to have outdone themselves.

In June, CTO Paolo Ardoino said that all expiring commercial papers were rolled into US Treasury Bills. He said that the company would continue to do so until exposure to commercial paper was reduced to zero.

Tether’s reserves have constantly been a cause for controversy. Moreover, unlike the Center’s USDC, Tether has not had very regular audits. Additionally, the company is not very transparent with its investments and reserves. Many have thus predicted that USDC will soon topple USDT as the top stablecoin in the market.