Tether Buys Treasurys, Cuts Commercial Paper, Adds Non-US Debt
- Tether cut its holdings of commercial paper, bought Treasuries and added non-US debt to its reserves in the first quarter.
- US Treasuries make up almost half its roughly $82 billion in reserves, according to the most recent attestation report.
- Tether continues to trade slightly below the $1 mark, following a meltdown in rival stablecoin terraUSD this month.
Stablecoin tether‘s issuer now holds over a quarter of a billion dollars in short-term non-US government debt as part of its reserves, and it has cut its holdings of commercial paper in favor of Treasuries, according to its latest attestation report on Thursday.
Tether’s reserves have long been a source of controversy in the market. Despite its initial claims that its tether token was fully backed by US dollars, a series of audits showed this not to be the case, with short-term commercial paper making up the bulk of its reserves.
The issuer reached a settlement last year with the New York state attorney general, who alleged tether wasn’t fully backed by US dollars at all times.
Tether cut around $4 billion in holdings of commercial paper in the three months since its last attestation in February, which offered evidence of its holdings to December 31. Commercial paper is a form of short-term unsecured corporate debt that has been hit hard by an exodus of investors from the riskier corners of the fixed-income market.
It’s added roughly that amount in US Treasury bills — very short-dated government debt — in that time. At $39 billion, they made up almost half of Tether’s total reserves as of March 31.
“We believe that the evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our assurance opinion,” MCA Cayman, the independent account that completed the attestation, said.
Tether now holds $286 million in non-US government bills, having previously held none.
The issuer and its cryptocurrency have come under closer scrutiny this month, after the collapse of algorithmic stablecoin terraUSD. The crash of UST cast doubt on the robustness of stablecoins themselves, and on their role as a less-volatile store of value in the crypto market.
In theory, tether trades at a 1:1 ratio to the US dollar, but last traded at $1 on May 10, and has remained narrowly below that threshold ever since. Investors have ditched crypto this month, and tether has not been exempt.
The number of tether coins in circulation has dropped to its lowest in five months, having fallen by almost $10 billion so far in May, a sign analysts say could be worrying.
AG Thorson said.of USDT plunged $10 billion during the month of May. If redemptions continue at this pace and Tether can’t meet them, we could see a nuclear winter in crypto,” FXEmpire analyst
Tether’s chief technology officer, Paolo Ardoino, was far more sanguine.
“17+% reduction of commercial papers in Q1 2022. Also Q2 looking great, current reduction of CP over Q1 is already 20+%. Moved all to US treasuries. Portfolio avg maturity has gone down a lot, improving
tweeted on Thursday.at hand. Thanks all,” he