Tether did it! Or at least he just declared that he has reduced all its commercial paper reserves to zero. Tether is a well-known stablecoin in the crypto world. But it is however criticized for its lack of transparency. The team seems to want to show good faith by reassuring the holders of its token.
With this action, she hopes to reconnect more with the public and retain Tether holders. The token has had many setbacks regarding the application of withdrawal requests, suspicion of market manipulation, etc. But that hasn’t stopped the coin from becoming one of the most prized cryptos in the world with a total capitalization of $70 billion. To top it all, CoinMarketCap places Tether in 3ᵉ position of the best cryptos on the market.
Tether: commercial paper reserves at 0, what it means
It is this October 13, 2022 that the announcement will have been made. Tether completely gets rid of its reserves of commercial papers and a very unfortunate controversy at the same time. Indeed, since 2017, it has been accused of a critical lack of transparency with its investors on the nature of its assets that back the USDT stablecoin. This past May, Tether will have experienced a sharp drop in value in a short period of time, something very damaging for a stablecoin. In question, a rumor claiming that 85% of Tether’s reserves are held in Chinese commercial paper. And to help you realize the impact of the announcement, here is a graph from CoinMarketCap which shows the fall in value of Tether following these declarations.
Price of Tether in euros, during the year 2021-2022 – Source: CoinMarketCap
Tether demonstrates its good faith!
To counter the brutal fall of its stablecoin, the team in charge has multiplied the announcements about these famous reserves. Last July, Tether already said it had reduced its commercial paper portfolio to $3.5 billion from its $8.5 billion at the peak. In September, they repeated the feat once again, this time with a portfolio of 50 million dollars in commercial paper. Finally, this incredible story seems to be definitively closed by the founders of Tether with a zero commercial paper wallet. The bet seems to have been met with this announcement, 2 months before the year 2022 ends. If you want to find out for yourself about clearing these reserves, head over to the 3-part tweet from the official Tether account below.
BREAKING: Tether is proud to announce that we have completely eliminated commercial paper from our reserves. This is evidence of our commitment to back our tokens with the most secure, liquid reserves in the market. (1/3)https://t.co/zBa9jRe7so
— Tether (@Tether_to) October 13, 2022
To add to the story, Tether also announced that it will improve the transparency of its system by sharing its USDT reserve details through its quarterly attestation reports. In short, the Tether team has just achieved a feat that will delight more than one investor. With a crypto market potentially set to explode before long, Tether can hope for good days ahead.
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Why is a wallet full of commercial papers bad news?
For those who don’t quite understand why this story of a portfolio made up of 85% commercial paper is reprehensible, we explain everything to you!
Commercial paper is a very useful instrument that allows for short-term financing. It is issued by companies and is based on the recognition of commercial credit by the debtor. The main function of commercial paper is to grant a company, additional time to pay his debts. In the case of Tether, it counted commercial papers in its reserves.
Commercial papers are a bet on the future
The problem with commercial papers is that they are not than a promise of future payment. With Tether, a wallet of high commercial papers is not a high enough guarantee, especially since these are difficult to verify. To make matters worse, a commercial paper does not go beyond 9 months and no guarantee is given by the companies having contracted them. In order to reassure public opinion, Tether absolutely had to reassure about the management of its funds.
Tether USDT heads for Treasuries
T-bonds (treasury securities) are issued directly by the US government. These far exceed the 9-month validity of commercial papers. They can go up to 30 years and interest is affected twice a year.
Tether: share of commercial paper compared to T-bonds
Nothing seems to stand in the way of Tether now. The team was able to demonstrate its seriousness in the face of competition and sustain its funds. Tether can now register as the reference stablecoin and has even opted for an audit to be carried out every month by an independent body, namely BDO Italy. If you intend to deposit funds in USDT, check our page on the real-time prices of the biggest cryptos.