Tether, issuer of the world’s largest stablecoin, said in a blog post it has cut its commercial paper holdings to zero and replaced them with U.S. Treasury bills.
See related article: Are stablecoins like Tether ready for regulatory scrutiny?
Tether is the issuer of stablecoin USDT, a token that claims to have a 1:1 peg with the U.S. dollar. Due to a February 2021 settlement with the New York State Attorney General, Tether is required to issue quarterly reports on its reserves, and the report exposed that it had about 50% reserve backed by commercial papers, which is considered as a high-risk asset.
Tether started slashing its commercial paper in September 2021.
Stablecoins are cryptocurrencies whose value is pegged to that of an underlying asset, such as the U.S. dollar, by holding assets equivalent or greater than the cryptos’ total market cap. USDT has a market capitalization of about US$68 billion, according to CoinMarketCap.
Treasury bills are perceived as being more stable than commercial papers, which are short-term debt products that companies issue to increase financing.
Tether said in its blog post the move is a step toward “greater transparency and trust.”
In February 2021, Tether reached an US$18.5 million settlement and monthly reserve disclosure with the U.S. Attorney General of New York State, as the latter sued the former with insufficient reserves to support the stablecoin.
See related article: SEC fines former Tether auditor over accounting malpractice