The company behind Tether (USDT) is pushing back on rumors about the reserves composition of the largest stablecoin by market capitalization.
In a new statement, Tether denies claims that 85% of its commercial paper holdings are backed by Chinese or Asian commercial papers and are being traded at 30% off.
“These rumors are completely false and likely spread to induce further panic in order to generate additional profits from an already stressed market. Tether condemns such attempts which oftentimes see simple users take the biggest hit, while few coordinated funds increase their profits.”
Commercial papers are a form of unsecured, short-term debt issued by companies and financial institutions to meet liabilities They are usually sold at a discount.
Tether says the reports are completely false and are likely being spread to induce panic in the market to generate additional profits.
In its assurance report for Q1 2020 published in May, Tether said over 47% of the total USDT reserves are US Treasuries. The commercial paper, worth $20 billion at the time, comprises less than 25% of the stabelcoin’s backing.
The USDT issuer says it has since slashed its portfolio of commercial paper by $9 billion with the end goal of completely eliminating it.
“Tether can report that its current portfolio of commercial paper has since been further reduced to 11 billion (from 20 billion at the end of Q1 2022), and will be 8.4 billion by the end of June 2022. This will gradually decrease to zero without any incurrences of losses. All commercial papers are expiring and will be rolled into U.S. Treasuries with a short maturity.”
Tether’s statement comes after the head of the Office of the Comptroller of the Currency (OCC), Michael Hsu, warned about the risks of stablecoins as the TerraUSD (USDT) also lost its peg, igniting the Terra (LUNA) meltdown.
“Clearly, you saw contagion, not just from Terra to the broader crypto ecosystem, but to Tether, to other stablecoins, and I think that’s something that wasn’t assumed. And I think that’s something people have to really pay attention to.”
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