Tether Holdings Limited, the issuer of the USDT stablecoin, has reduced its exposure to commercial paper to zero. By doing this, the stablecoin issuer has solved one of its long-withstanding issues that have formed the basis of criticism on Tether’s quality of reserves.
Tether reduces commercial paper holdings to zero
While announcing the move on October 13, Tether also said it had replaced all its commercial paper holdings with US Treasury Bills. The company added that getting rid of commercial paper in its reserves demonstrated that it was committed to supporting its tokens using the most secure reserves available in the market.
“Tether has eliminated over $30 billion dollars of commercial paper without any losses, proof of how Tether’s reserves are conservatively and professionally managed. Tether has also increased its direct exposure to US Treasuries by more than $10 billion in the last quarter,” the company added.
Tether stated that it was maintaining a diversified portfolio and limiting exposure to high-risk assets. The company also said that it wanted to be a pioneer in building transparency in the stablecoin sector.
Scrutiny over Tether’s reserves
USDT is the largest stablecoin by market cap and trading volumes. However, Tether has been the subject of public scrutiny because of the nature of its reserves. Crypto investors have been scrutinizing the composition of USDT’s reserves over the past year.
In October last year, a report by Bloomberg speculated that Tether could have a large exposure to Chinese commercial paper. At the time, one of the largest property developers in China, Evergrande, was on the verge of collapsing. The report triggered speculations on how long Tether would continue meeting redemptions if Evergrande went under.
Commercial papers are short-term assets. They are unsecured debt obligations issued by a financial institution or a corporation. These assets usually come with high credit risk.
In June this year, Tether denied claims that 85% of its commercial paper holdings were supported by Asian or Chinese commercial paper. The company also vowed that it would get rid of its exposure to commercial paper.
Over the past months, Tether has issued regular updates alerting users of its commercial paper reserves reduction. The company’s act to reduce its commercial paper holdings to zero could go a long way in building trust in the USDT stablecoin currently facing competition from rivals such as USD Coin and Binance USD.
In August, Tether announced hiring BDO Italia to start conducting period reviews and attestations of its dollar reserves. The stablecoin issuer also said that it was planning to increase the number of times that it submitted reports from quarterly to monthly.
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