Tether Holdings Limited, the issuer of the largest stablecoin by market cap, USDT, announced this Friday (1st) a considerable reduction in its holdings in commercial papers.
According to the company, today, Tether has $8.4 billion in commercial paper, short-term unsecured debt issued by companies. In this way, the value of the papers varies, depending on the companies that issue them.
The quality of Tether’s holdings in commercial papers has been the subject of market speculation, which has questioned USDT’s backing for some time.
Previously, each USDT was believed to have $1 in escrow. But when the company released its first report, that thesis fell apart. Since then, Tether has been trying to build a more robust reserve.
Goal is to zero commercial papers
As reported by Tether, of the total US$8.4 billion in securities, US$5 billion will expire on July 31. That is, at the end of this month.
This will result in a reduction of nearly 60% of commercial paper assets to a minimum of $3.5 billion, “which is on track with Tether’s commitment to the community,” the company said.
“The goal remains to reduce the number to zero,” Tether said. “While both commercial paper and treasury reserves are commonly held as liquid assets and cash equivalents, the US Treasury will now constitute an even greater percentage of Tether’s reserves.”
The USDT issuer also reported that this reduction is part of a larger strategy to ensure Tether has a diversified portfolio. In addition, the idea is to limit the company’s exposure to individual issuers or assets.
Previous report already showed a reduction
Prior to this reserve update, Tether had released its last quarterly assurance opinion on May 19.
According reported CriptoFácil at the time, the opinion showed that the company was already starting to reduce its investments in commercial paper.
More precisely, the report showed a reduction of about 17% in commercial paper holdings compared to the previous quarter. In addition, the company reported an overall increase in US Treasury bonds.
Audit of USDT reserves
At the end of June, the company also communicated who hired a specialist accounting firm to do a full audit of their bookings.
Paolo Ardoino, Tether’s chief technology officer, declined to name the company. Instead, he just said that it will be one of the 12 largest accounting firms in the world.
The market cap of Tether’s USDT stablecoin has dropped from $82.2 billion since May to the current $66.1 billion, due to an increasing amount of user redemptions following the collapse of the terraUSD algorithmic stablecoin (UST).
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