The old adage “trust is everything” has never been more true than in the world of cryptocurrency. In the aftermath of the Terra collapse, it’s become clear that trust is the most important factor when it comes to stablecoins. Users are willing to pay a premium for tokens that they trust, and they’re quick to abandon ship when that trust is violated. As we move forward into an increasingly digital world, it’s clear that trust will continue to be the most important currency of all.
In fact, this couldn’t be more true than in the case of Tether’s USDT stablecoin, which as one of the most popular options in the crypto ecosystem has come under fire in recent years due to its run-ins with the U.S. SEC and concerns about its reserves. As a result, many investors are still hesitant to trust USDT with their money.
What’s more, in December 2021, Tether (USDT), the 3rd largest cryptocurrency in terms of market cap, published a paper which revealed that a large portion of their reserves were in commercial paper (CP), a type of unsecured debt instrument issued by corporations to raise short-term capital.
This has caused great concern among investors, as CP is much less liquid than other assets. In a financial run, it would be very difficult to sell them in order to raise cash- meaning Tether might be forced to sell – hypothetically speaking – its holdings in order to meet redemptions.
A Tether user took to Twitter to address these concerns, asking whether the stablecoin is fully backed. Tether Chief Technology Officer Paolo Ardoino responded by stating that “Tether is fully backed.”
We have redeemed 7B in 48h, without the blink of an eye. How many institutions can do the same?
We can keep going if the market wants, we have all the liquidity to handle big redemptions and pay all 1-to-1.
Yes, Tether is fully backed.— Paolo Ardoino 🕳🥊 (@paoloardoino) May 17, 2022
Recently, Tether also said the majority of its reserves are in U.S. Treasuries after having reduced its CP exposure over the last six months.
Furthermore, the stable released its consolidated reserves report Thursday along with attestation from the independent auditing firm MHA Cayman.
The report shows Tether’s USDT tokens were fully backed as of March 31. The report also reflects consolidated total assets printing $82.4 billion- exceeding consolidated liabilities at $82.2 billion, $82.1 of which related to USDT issued.
The attestation further showed a 17% quarter-over-quarter decline in commercial paper from $24.2 billion to $19.9 billion. It also said that it has further reduced its CP holdings by 20% since April 1.
Ardoino also commented on the report, saying that this “latest attestation further highlights that Tether is fully backed and that the composition of its reserves is strong, conservative, and liquid.”
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