Stablecoin Issuer Tether Fulfills Promise by Reducing Commercial Paper Holdings Down to Zero

October 13, 2022 Bitcoin.com

Tether CTO Says US Treasury Notes Account for More Than 58% of USDT’s Reserves

October 3, 2022 Bitcoin.com

Tether Calms Fears Over Reserve Backing, Exposure to 3AC, Celsius

June 15, 2022 The Crypto Briefing

Tether slashes commercial paper by 21% in latest reserves attestation

February 23, 2022 Coin Telegraph

Coin Telegraph

Tether’s cash and bank deposits also dropped 42% to 4.187 billion, while its allocation to money market funds increased 200% to $3 billion, and its treasury bills grew 77.6% to $34.52 billion.

USDT stablecoin issuer Tether cut its reserves allocation to commercial paper by more than one fifth between September and December last year, dropping from around $30.5 billion to $24.16 billion.

Tether is legally required to disclose its reserves every quarter as part of an $18.5 million court settlement with the Office of the New York Attorney General from February 2021. The firm was alleged to have misrepresented the specific amount of fiat backing USDT in 2017 and 2018.

The latest attestation was conducted by Cayman Islands-based Accountants MHA Cayman and provides a breakdown of Tether’s reserves as of 31 December 2021.

The report states that Tether’s “consolidated assets exceed its consolidated liabilities,” however the difference is minimal with total assets tallied $78.67 billion while liabilities sat at around $78.53 billion.

Tether’s Latest Assurance Opinion Reveals That Reserves Held Exceeds Liabilities ⬇️https://t.co/QXQEQ0go0F
— Tether (@Tether_to) February 22, 2022

The makeup of Tether’s reserves shifted significantly since its prior report from late September, with cash and bank deposits dropping 42% to 4.187 billion, while its allocation to money market funds increased 200% to $3 billion, and its treasury bills also grew 77.6% to $34.52 billion.

The significant amount of commercial paper backing Tether’s reserves — which hit 65.39% as of May 2021 — sparked criticism from onlookers who have questioned the lack of transparency regarding the origins of the paper and its credibility as an investment. There were also concerns last year Tether may be exposed to the Evergrande crisis via commercial paper holdings, although Tether said this was not the case.

Commercial paper is often issued by large corporations and is used for financing payroll and short term-liabilities. It is referred to as unsecured debt as it is usually not backed by any form of collateral.

Tether’s attestation states that $13.93 billion worth of its commercial paper has a maturation window of 0-90 days, $9.94 billion has 91-180 days and $823 million has between 181 and 365 days. Any commercial paper with a maturation period longer than 270 days (nine months) must be registered with the U.S. Securities and Exchange Commission (SEC).

According to data from Coingecko, USDT’s market cap sits at $79.47 billion at the time of writing, with its biggest competitor USD Coin (USDC) sitting at around $52.7 billion.

Tether Updates Assets Backing USDT in Latest Report

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Big Three Credit Agency Fitch Says Stablecoin Growth Could Be ‘Disruptive’ to Securities Markets

October 18, 2021 Bitcoin.com

Auditors reveal USDC backing as Jim Cramer sounds alarm over Tether’s mad money

July 21, 2021 Coin Telegraph

Cash reserves

Grant Horton has conducted an audit on USDC’s reserves and Jim Cramer has questioned what's going on with Tether's commercial paper reserves.

Auditors working for Circle have disclosed the reserves backing the firm’s USDC stablecoin, while Mad Money’s Jim Cramer has questioned Tether’s lack of transparency with its USDT reserves.

Multi-national tax advisory firm Grant Horton conducted the audit, and a reserve attestation report was published on July 20 which showed that 61% of USDC’s reserves were held in cash and cash equivalents equating to $13.4 billion, as of May 28.

Circle’s total commercial paper accounts for 9% of its reserves, and the figures provide a stark contrast to Tether’s reserves, in which undisclosed commercial paper accounted for 49.5% of its total reserves — something that Cramer has been "sounding the alarm" about recently.

The Circle report defines cash as deposits at banks and Government Obligation Money Market Funds, while cash equivalents are defined as securities with an original maturity less than or equal to 90 days.

On May 28 there was 22,176,182,251 total USDC in circulation, with the total fair value of Circle’s U.S. dollar-denominated assets held in segregated accounts fully backing the supply of USDC according to the report.

Circle noted that it voluntarily disclosed its reserves as part of its transparency goals, with the firm revealing plans to go public via a special purpose acquisition company (SPAC) earlier this month.

‘Yankee CDs’ and US Treasures represented the next biggest share of assets backing the reserves at 13% and 12% each, with a combined total value of $5.6 billion.

Yankee CDs are defined as “USD denominated Certificates of Deposit issued in the US by branch(es) of Foreign Banking Organizations,” with a maximum maturity of 13 months, while the U.S treasuries have a maximum maturity of three years.

The total commercial paper allocations represent 9% worth $2 billion, corporate bonds account for 5% worth $1.1 billion, and municipal bonds and U.S. agencies comprise 0.2% worth $100 million.

Circle’s USDC reserve breakdown was published amid increased scrutiny on the stablecoin sector from the U.S. government, with United States Treasury Secretary Janet Yellen meeting with other financial regulators this week to discuss a regulatory framework for stablecoins.

Finally, as we march towards becoming a listed company, we will be filing quarterly audited financials and management disclosures that will be required as an SEC regulated public company, and will include USDC reserve composition disclosures similar to our attestations.
— Jeremy Allaire (@jerallaire) July 20, 2021

Circle CEO Jeremy Allaire emphasized in a July 20 blog post that the firm is committed to providing transparency of its operations and working within the traditional financial system:

“Core economic activities underpinning USDC are built inside the perimeter of the U.S. financial system, and not outside of it.”

Jim Cramer thinks Tether is Mad Money

Speaking during a July 20 interview with The Street, Jim Cramer, the host of CNBC’s Mad Money questioned Tether’s lack of transparency and is asking why the firm hasn’t disclosed what the large percentage of commercial paper backing USDT is.

Tether released a brief reserve breakdown on May 13 and did not mention any independent review conducted on behalf of the firm.

Tether’s reserve breakdown showed that as of March 31, three-quarters of its reserves were held in cash, cash equivalents, other short-term deposits, and commercial paper. Amongst that category, commercial paper accounted for 65.39%, with cash alone accounting for just 3.87%.

The firm is yet to reveal what comprises its commercial paper holdings, and Cramer has been sounding the alarm bells:

“I am concerned about Tether, and I'm not gonna stop sounding the alarm until I know what Tether has. They’ve got about $60 billion in commercial paper. Tether open up the kimono, what commercial paper do you own?”

“Why wouldn’t they tell us?” he added, as he questioned whether the SEC will step in to find out.

“There’s a belief that a lot of the commercial bank paper, is Chinese bank paper, why not put that to rest and tell us it isn't?” he said.

Commercial paper

Jim Cramer thinks Tether is Mad Money

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