Tether reduces commercial paper – The Cryptonomist

Tether reaffirms that USDT issued are fully collateralized, with a significant 17% reduction in commercial paper among them and an increase in US Treasury bonds instead.

Tether’s off-chain collateralization: reduction in commercial paper and increase in Treasury bonds

Yesterday, Tether released its latest quarterly Assurance Opinion prepared by the independent firm MHA Cayman. 

The document is dated 18 May 2022 and refers to the situation on 31 March 2022. It was published in the transparency section of Tether’s official website. 

In the first quarter of 2022, the total value of commercial paper fell from $24.2 billion in the previous quarter to $20.1 billion, with a further reduction of 20% in April, which will be noted in the next report on the second quarter. In addition, the average rating of commercial paper and certificates of deposit fell from A-2 to A-1. 

As of 31 March, Tether’s reserves backing USDT, EURT, CNHT and XAUT had a combined value of $82,424,821,101. At that time, the market capitalization of USDT was about $80 billion, while the total market capitalization of the other stablecoins did not exceed $1 billion. 

Thus, at that time, the reserves exceeded the total market capitalization of Tether’s stablecoins in terms of value.

Changes in the composition of these reserves show a significant reduction in medium-term assets, with an increase in those with a short-term focus. 

They also indicate an increase in investments in money market funds and US Treasury bills. The latter rose from $34.5 billion to $39.2 billion, an increase of 13%. 

Secured loans were also reduced by $1 billion. 

Tether’s transparent reports

It is worth mentioning that with the closure of the lawsuit brought against Tether, iFinex and Bitfinex by the NYAG, the company is required to periodically submit a report on its activities to the authorities, and Assurance Opinions on reserves are an integral part of this reporting. 

After a brief moment of decline in the value of USDT, which fell as low as $0.97 on 12 May, its value has steadily returned to around $1, not least because Tether itself returned around $9 billion in one week to those who gave back tokens. 

At this point in time, there does not seem to be enough data to really judge USDT’s resilience to be at risk, at least in the short term. 

Tether’s CTO, Paolo Ardoino, said:

“This past week is a clear example of the strength and resilience of Tether. Tether has maintained its stability through multiple black swan events and highly volatile market conditions and, even in its darkest days, Tether has never once failed to honor a redemption request from any of its verified customers. 

This latest attestation further highlights that Tether is fully backed and that the composition of its reserves is strong, conservative, and liquid. 

As promised, it demonstrates a commitment by the company to reduce its commercial paper investments and in doing so, led to a rise in its holdings in U.S. Treasury Bills. 

In fact, since April 1 2022, Tether has seen a further reduction of 20% in commercial paper which we will reflect in the Q2 2022 report. As Tether’s growth in the market continues to validate the business, we are pleased to share attestations now, and in the future, as part of our ongoing commitment to transparency”.