Tether – the entity backing the world’s largest stablecoin – is once again firing back against those spreading doubt about its reserves. The company claimed that it holds no Chinese commercial paper, and will soon eliminate its commercial paper exposure altogether.
Misinformation: Crypto’s Biggest Threat
In an announcement on Wednesday, Tether stated that the crypto industry’s biggest current threat is the spreading of false information. The firm put it in the same league as hacks, scams, and cyberattacks, threatening the industry’s reputation and community members.
“With that in mind, Tether would like to again reiterate to naysayers who continue to spread falsities about its commercial paper holdings, that you are wrong – plain and simple,” the announcement continued.
Popular mainstream news outlets like Bloomberg have repeatedly suggested that Tether holds insufficient stablecoin reserves. Reserves are used to provide a fixed exchange rate for Tether’s USDT stablecoin, ensuring that it maintains its $1.00 peg.
“Naysayers” have also claimed that significant portions of these reserves are comprised of Chinese debt – a no-no in money markets. Though Tether has previously lambasted Bloomberg for the former accusation, it didn’t directly address the latter at the time.
However, in Wednesday’s announcement, the firm specified that it holds “no Chinese commercial paper” as of July 27th. It also holds just $3.7 billion in total commercial paper, down from $30 billion in July 2021. The firm intends to reduce that position to just $200 million by August, and to $0 by “end of October/early November 2022.”
“Tether is determined to lead the stablecoin market through the next wave of adoption and it will do so proudly regardless of critics and rumors,” concluded the statement.
CoinDesk On Blast?
Prior to Tether’s official statement, Tether CTO Paolo Arduino called out crypto news platform CoinDesk for recently making such claims.
In the original piece discussing Circle’s USDC stablecoin, CoinDesk said Tether “may be holding” significant Chinese commercial paper. It also suggested that this debt was under pressure from the degrading Chinese real-estate market.
Arduino responded with the specific numbers pertaining to its commercial paper holdings that were later outlined in Tether’s statement. He then joked that CoinDesk is much more critical of Tether than it is of “family and friends” taking “insane risks” on unreliable faith-based lending.
CoinDesk later corrected the article to claim that it “seems likely” that Tether held Chinese commercial paper in the past.
Tether VS Other Stablecoins
Though Arduino offered a brief preview into Tether’s holdings, the company is yet to provide a Q2 attestation report on its reserve status.
Runner-up stablecoins including USDC and BUSD have already done so. As of June 30th, each firm held combined reserves surpassing $70 billion, entirely comprised of cash and US Treasuries.
This indicates that Circle followed through on eliminating its commercial paper exposure, which stood at 9% last year. It remains to be seen whether Tether can do the same.
The top stablecoin issuer showed progress in Q1, reducing its commercial paper down to $20 billion from $24.2 billion in the prior quarter. Meanwhile, US Treasuries comprised $39 billion of its $84 billion total reserves.
Tether faced billions of dollars in redemption pressure in the aftermath of Terra’s collapse. TerraUSD was the third-largest stablecoin in early May but collapsed to zero after its algorithmic stablecoin peg fell apart.
By contrast, USDT appeared to remain stable under pressure, despite losing significant market share to USDC.