According to a recent blog post, Tether has lowered its holdings of commercial paper to zero and replaced them with U.S. Treasury bills. Tether said the action is a part of its “ongoing efforts to increase transparency” and back its tokens with “the most secure reserves in the market” to ensure investor protection ultimately.
Commercial Book Explained
Commercial paper is a short-term, unsecured debt instrument issued by businesses; it is regarded as less trustworthy than Treasury bills. According to Paolo Ardoino, Tether’s Chief Technology Officer, 58.1% of its assets were in T-bills as of October, up from 43.5% in June. The exact number is unknown, but Ardoino did mention in a post on Thursday that Tether was able to pay $7 billion, or 10% of its reserves, in less than 48 hours.
The statement released on Thursday further stated that zeroing out the remaining commercial paper holdings was intended to promote “greater transparency and trust, not only for tether but for the entire stablecoin industry.”
Undoubtedly, trust issues have arisen in the stablecoin segment of the crypto market in recent months.
Stablecoin Credibility Issues Over the Past Year
In May, terraUSD (UST), once one of the most well-liked stablecoin projects, collapsed, costing investors billions of dollars. Last year, Tether was forced to pay a multimillion-dollar fine after a legal battle with the New York attorney general’s office over concerns related to the viability of its reserves.
The collapse of UST had a cascading effect on the larger crypto ecosystem. Tether briefly lost its dollar peg and dropped as low as 95 cents due to the fallout.
However, Tether, the company that created the stablecoin of the same name, was already facing significant regulatory pressure due to its reserves long before UST’s dramatic implosion.
Fiat reserves back the majority of stablecoins (UST was one of a new generation of “algorithmic” stablecoins that seek to base their dollar peg on computer code.)Tether previously stated that every single one of its tokens was backed 1:1 by dollars kept in a bank. To support its token, the company revealed it relied on various other assets, including commercial paper, after settling with the New York attorney general.