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Tether Cuts Its Commercial Paper Holdings To Foster Trust

2 mins
Updated by Ryan James
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In Brief

  • Stablecoin issuer Tether hopes its recent slashing of commercial paper holdings will auger well for the stablecoin industry
  • It now holds T-bills as the primary asset in its reserves
  • Tether and rivals now hold more T-bills than Berkshire Hathaway
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Tether seems to be making moves to become more trustworthy. The stablecoin issuer Tether (USDT) has made good on its word to cut its exposure to riskier assets like commercial paper.

As of Oct. 12, 2022, the company holds no commercial paper, with Treasury bills making up most of its reserves. The company announced this in a blog post on Oct. 13, 2022.

Tether and rivals hold more T-bills than Berkshire Hathaway

This latest announcement comes on the back of gradual cuts in commercial paper holdings, which are short-term debt instruments issued by companies to raise funds for short-term liabilities like inventories and payroll. In contrast, Treasury bills are short-term government debt obligations that governments sell to companies to raise funds for major civil projects such as road and school construction. According to Wall Street Bank, JPMorgan Chase, Tether and its stablecoin rivals’ share of the market for Treasury bills exceeds that of Warren Buffet’s investment firm Berkshire Hathaway.

By Jul. 1, 2022, the company announced it had reduced its exposure to commercial paper to $3.5 billion, and on Sep. 13, it announced that its exposure to the short-term debt instrument had dropped to below $50 million.

According to the blog post, Tether believes that eliminating commercial paper helps foster trust in the stablecoin industry, which recently came under intense scrutiny following the collapse of another stablecoin, TerraUSD, in May 2022. TerraUSD relied on an arbitrage mechanism with sister coin LUNA, rather than reserves, to maintain its peg to the U.S. dollar.

VanEck strategy adviser Gabor Gurbacs lauded the company and its chief technology officer Paolo Ardoino for the company’s latest achievement:

Besides Treasury bills, Tether reserves are backed partly by a short-term fixed-income portfolio that Gurbacs called “less risky to me than most bank balance sheets.”

Tether recently celebrated its eighth birthday.

Tether CTO boasts about achievements

Ardoino boasted that the company was the only one amongst fellow stablecoin issuers that could honor $7B in withdrawals in 48 hours. He also said that USDT was flourishing in countries with large populations with no access to banking facilities. In Mexico, Tether’s peso-backed stablecoin is now used to pay for yoga classes, art, and drinks. 

Ardoino also expressed excitement that the Bitcoin-centric Lugano Plan B forum conference was approaching. The event boasts a lineup of big names in the bitcoin space, including Adam Back of Blockstream, computer scientist Nick Szabo, and bitcoin expert Jimmy Song.

Tether has partnered with the city of Lugano to help it adopt Bitcoin at all levels of the city, from merchants accepting bitcoin payments to the city taking it for tax payments.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...