Tether to Cut Commercial Paper Holdings to Less Than $4 Billion

Tether, the firm behind the number one stablecoin, USDT, announced that it would reduce its commercial paper holdings to $3.5 billion by the end of this month.

The issuer announced that $5 billion of its current $8.4 billion commercial paper holdings would expire on July 31. This means the commercial paper in its portfolio will drop significantly and bring it closer to its goal of reducing its commercial paper holdings to zero.

Tether held around $20 billion in commercial paper in March, showing a steady decline in the past few months. 

According to the statement:

This is part of a larger strategy to ensure that Tether has a diversified portfolio with limits to exposure on individual issuers or assets.

Commercial papers are short-term debts issued by companies. The move to cut down the commercial paper in its reserves to zero is part of an effort to show its transparency and validate the business.

Tether will phase out commercial paper in favor of treasury bonds

While it phases out commercial paper, Tether will increase its U.S. treasury bonds. U.S. treasury bonds now account for a significant portion of Tether’s portfolio, at 47% in its last quarterly report.

The issuer has been criticized for its lack of transparency due to failing to disclose the companies behind the commercial paper in its portfolio. During the Evergrande crisis in 2021, many suggested that Tether held Evergrande commercial paper, but it denied this.

Some weeks ago, another report claimed that its commercial paper portfolio is 85% backed by Chinese or Asian commercial papers. The rumors claimed they were unsecured and trading at a 30% discount. 

Tether described these claims as false and only an attempt to generate panic in the distressed market. Paolo Ardoino, Tether CTO, has accused hedge funds of spreading false rumors to make profits by shorting USDT.

The firm also denied any exposure to any of the embattled crypto firms like Celsius Network and Three Arrows Capital. It claimed that it had liquidated Celsius’s position in USDT without any losses to Tether as all its lending activities are over-collateralized.

Tether briefly lost its peg in May, but soon recovered. Although it struggled after the crash of TerraUST with withdrawals of around $10 billion, the stablecoin remains the dominant fiat-backed stablecoin in the market and currently has a supply of over $66 billion.