Tether says USDT stablecoin is now backed by T-Bills
Tether reports that it has removed commercial paper from its stablecoin reserves, ending a year-long relationship with the investment vehicle that had partially backed its crypto. The issuer said Thursday it had replaced the paper with US Treasury bills — short-term government-issued debt — as part of ongoing efforts to increase transparency. Tether also said the move would help boost confidence in its stablecoin (USDT) while demonstrating its commitment to underpinning its tokens with safer assets.
Controversies over the use of its trading papers, as well as the certainty of the assets backing USDT, have dogged the issuer since its inception nearly a decade ago. As the world’s largest stablecoin by market cap ($68).4 billion), USDT consists of several reserves that provide one-for-one support for the value of the currency pegged to the US dollar. These include, but are not limited to, cash and equivalents, loans, corporate bonds and digital assets.
A 2021 legal settlement with the New York Attorney General’s Office required Tether to issue a quarterly certificate, which is now being processed by newly hired accounting firm BDO Italia to verify its holdings. Tether said it intends to release these attestations monthly as progresses to appease critics. and to reinforce an air of legitimacy about its operations.
Tether transparency has been a long time coming
Since at least 2017, no one knows exactly what is behind USDT. The issuance has been repeatedly criticized by industry participants, law enforcement, government and legal experts for the veracity of the issuer’s claims. As part of its efforts to silence these critics, Tether has made serious attempts to reduce its reliance on trading papers this year, cutting it from $20 billion in Q2 to $8.5 billion in Q3.
According to a certificate submitted by BDO in August, Tether holdings are $28.85 billion in US Treasury bills, $6.81 billion in money market funds, $5.41 billion in bank deposits, $3 billion in reverse purchase agreements, and $397 million in foreign treasury bills, while $5.55 billion is associated with “more investment”. About $4.5 billion is also in secured loans
With August’s switch from $8.4 billion worth of commercial paper to US Treasury bills, total Tether holdings are approximately $66.4 billion. Tether has never provided a detailed breakdown of its trading assets, according to Bloomberg, and professional traders have struggled to find clues as to its market share for such debt. In 2021, Tether agreed to pay a $41 million fine in a settlement with the CFTC for making “false or misleading statements and omissions” about supporting its stablecoin tokens.
The Tether company has also repeatedly promised a full five-year audit of its
stablecoin reserves, but failed to deliver: instead, it offers certifications based on information provided by its management regarding its account balance at a snapshot time. That could finally change.
Last month, a US judge ordered the issuer to test the holdings backing its stablecoin as part of a market manipulation lawsuit alleging that USDT artificially inflated cryptocurrency prices between 2014 and 2018. Tether is now required to provide documents to determine its USDT reserves, including bank statements from banks and other institutions. A Tether representative was not immediately available for comment at the time of publication.