Tether to reduce commercial paper holdings in USDT reserves

PARIS — Crypto firm Tether plans to reduce its holdings of commercial debt in its reserves as the issuer of the world’s most widely used “stablecoin” continues to question what its digital currency is actually backed by.

Last year, Tether disclosed that it held cash but had also purchased a large amount of commercial paper, which is short-term corporate debt. This has raised concerns given that Tether does not disclose exactly which companies it holds commercial paper from and where these entities are based.

But the company has reduced the amount of commercial paper in its reserves. In Q4 2021, commercial paper accounted for just over 30% of Tether’s total reserves, up from over 44% in Q3.

“Over time we will continue to shrink commercial paper, we are not done with the shrink yet,” said Paolo Ardoino, CTO of Tether and affiliate cryptocurrency exchange Bitfinex, to CNBC on Wednesday during the Paris Blockchain Week Summit.

Ardoino said that Tether transferred the money from this commercial paper to US Treasuries.

A stablecoin is a type of digital currency designed to be pegged to a real-world asset such as the US dollar. Their value is not meant to fluctuate as much, unlike the wild fluctuations seen in cryptocurrencies like bitcoin.

Tether issues the USDT token and has a market capitalization of over $82 billion. Crypto traders use USDT to trade cryptocurrencies like bitcoin rather than exchanging their money for the fiat version of the US dollar.

But there has been controversy over the claims of Tether and its reservations. Last year, the US Commodity Futures Trading Commission fined Tether $41 million for “making false or misleading statements” that its USDT token was 100% backed by corresponding fiat currencies .

Last year, as part of a settlement with the New York Attorney General over a separate case, Tether agreed to provide a breakdown of the assets backing its digital currency.

But he did not disclose the companies whose commercial paper he owns. Tether does, however, disclose the quality ratings of the debt it holds.

Ardoino pledged to more transparency but did not specify what else the company might disclose.

“Our journey towards increased transparency is not yet complete,” Ardoino said.

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