Tether Cuts Its Commercial Paper Holdings

Years together, the cryptocurrency firm Tether was persistent to share that each of its USDT coins was supported by 1 US Dollar. As Tether began issuing “transparency reports” depicting its reserves constituting cash, crypto tokens, bonds, cash equivalents, and commercial paper. 

Regulators were concerned that stablecoin Tether wasn’t as stable, mostly due to the firm not announcing in detail the debts the company holds. However, in an interview, the CTO of Tether Paolo Ardoino stated that the company is scaling back its reliance on commercial paper and continue cutting down on its reserves as well.

How Is It Problematic?

Federal Reserve Chairman Jerome Powell explained why a stablecoin like Tether holding a large number of reserves in debt can be an issue. 

He explains commercial paper as short-term obligations via companies that can be either investment grade or liquid. Either of the scenarios is good for stablecoin, however, it hasn't been the same since the financial crisis of the 21st century. 

Tether’s Most Recent Breakdown

Reportedly, the largest stablecoin issuer, Tether cut its assets held in commercial paper from $30.5 billion in September to $24.2 billion in December. Additionally, Tether also reduced its cash assets, from $7.2 billion to $4.2 billion. 

The cryptocurrency firm has allocated its reserves to Treasury bills, now by almost doubling assets in short-term government securities from $19.4 billion to $34.5 billion.