Tether, the world’s largest stablecoin, reduces trading paper to zero

Tether, the world’s largest stablecoin, has reduced its commercial paper to zero, replacing it with US Treasury bills, according to a blog post. The popular US dollar-pegged cryptocurrency said the move is part of tether’s “ongoing efforts to increase transparency” and back its tokens with “the most secure reserves on the market” – with the ultimate hope of ensuring investor protection .

There are now about 68.4 billion tether tokens in circulation, according to data from CoinMarketCap, up from 2 billion three years ago. The cryptocurrency has a market cap of $68.4 billion.

“Tether has led the industry in transparency, issuing attestations every three months, constantly revising its reserve composition,” the statement continued.

Commercial paper is a form of short-term, unsecured debt issued by companies and is considered less reliable than Treasury bills. In October, Tether’s Chief Technology Officer, Paolo Ardoino, he tweeted that 58.1% of its assets were in bonds, compared to 43.5% in June. It’s not clear where that figure is right now, but Ardoino he wrote in a post on Thursday that Tether was able to pay $7 billion, or 10% of its reserves, in 48 hours.

“Ask your bank or other stablecoins if they can do this, in the same timeframe of course,” he wrote.

Thursday’s statement went on to note that zeroing out its trading paper balance was also intended to be a step toward “greater transparency and trust, not just for tether but for the entire stablecoin industry.”

The stablecoin corner of the crypto market has certainly had trust issues in the last year.

Last year, tether was forced to pay a multi-million dollar fine after a lawsuit with the New York attorney general’s office over concerns about the sustainability of its reserves, and in May, the collapse of terraUSD (UST), once one of the most popular stablecoin projects cost investors tens of billions of dollars.

The fall of UST led to a domino effect falling throughout the wider crypto ecosystem. Part of the impact involved the temporary loss of the dollar peg and a drop as low as 95 cents.

But long before UST’s dramatic collapse, Tether — the company behind the stablecoin of the same name — was facing serious regulatory backlash over its holdings.

Most stablecoins are backed by fiat reserves, with the idea that they have enough collateral in case users decide to withdraw their money. (UST was among a new breed of “algorithmic” stablecoins trying to base their dollar on code.)

Previously, Tether claimed that all of its tokens were backed one-to-one by dollars stored in a bank. However, following a settlement with New York’s attorney general, the company revealed that it was relying on a number of other assets, including commercial paper, to support its token.

In April, Ardoino told CNBC that the company was well-equipped to deal with massive buyouts, but New York Attorney General Letitia James’ office previously claimed that Tether sometimes lacked the reserves to back its dollar pledge. its cryptocurrency. It said that, as of mid-2017, the company had no access to banking services and was misleading customers about liquidity issues.

“Tether’s claims that its virtual currency was fully backed by US dollars at all times were lies,” he added. Tether said in a statement on its website that, contrary to speculation, “after two and a half years it has not been found that Tether has ever issued unsupported vouchers or to manipulate crypto prices.”

Critics have also raised fears that tether tokens were used to manipulate bitcoin prices, a claim that Tether has repeatedly denied.

While not yet big enough to disrupt US financial markets, tether could eventually grow to a size where owning US Treasuries becomes “really scary”, said Carol Alexander, professor of economics at the University of Sussex .

“Let’s say you go down the line and instead of $80 billion, we have $200 billion, and most of that is in liquid U.S. Treasuries,” he said. “Then a collapse of the peg would have a substantial impact on US financial markets and simply send the entire world into recession.”

Leave a Reply

Your email address will not be published. Required fields are marked *