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Tether replaces commercial paper holdings with U.S. Treasury Bills

On October 13, the top stablecoin issuer Tether revealed that it had replaced its commercial paper holdings with U.S. Treasury Bills, which now has about 56.3% of the company’s total reserves. The firm claims that the step was taken to support its USDT tokens with “the most secure reserves in the market”.

The initial announcement from Tether to reduce its commercial paper holdings was disclosed in May. Ever since, the firm has continuously reduced its commercial paper holdings every two months, typically by several billions dollars.

U.S. Treasury Bills

Stablecoins are created to maintain parity with government-issued money like the US dollar or the euro. 

The largest stablecoin issuer in the world is Tether, with a market cap of $68.3 billion. USDT is now the third-largest cryptocurrency behind Bitcoin and Ethereum. With market cap of $45.6 billion and $21.6 billion, rival stablecoins USDC and BUSD rank fourth and seventh respectively.

As per Tether’s website, short-term deposits and cash equivalents made up to 80% of the firm’s reserves. These cash equivalents consist of 0.75% non-U.S. Treasury Bills, 10.25% bank deposits, 5.66% reverse repurchase agreements, 12.88% money market funds, and 12.88% money market funds. While 54.57% of Tether’s cash equivalents are made up of U.S. Treasury Bills and Commercial paper accounts for the remaining 15.89%.

After the website gets updated to reflect Tether’s revised reserve composition, the firm’s U.S. Treasury Bills may represent up to 70.46% of its cash equivalent reserves, or roughly 56.3% of its total reserves.

Tether’s most recent announcement is a part of the stablecoin issuer’s ongoing efforts to increase the transparency of their business practises in response to questions like worry, mistrust, and confusion.

Due to its vast size, Critics have frequently claimed that the corporation poses a serious threat to cryptocurrency and the larger financial system.

The corporation audited its reserves ten times between 2017 and 2022 by six different agencies, but this did little to remove negative rumours. 

Tether promised to undergo a comprehensive audit in August after being accused for not performing an “audit that’s equivalent to a corporate colonoscopy” in a WSJ article.

Although USDT has previously lost its $1 peg, the token has always rapidly regained its value, even under extreme situations. Tether was able to redeem over $8 billion of USDT without experiencing any significant issues during the market instability brought by Terra’s collapse in May.

Will Tether be able to remove doubt about the condition of its reserves with a constant increase in transparency and thorough audits? However, one can always remain hopeful.

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