Tether slashes commercial paper by 21% in latest reserves attestation

February 23, 2022 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.

Mashinsky says USDT is minted for crypto as $1M bounty offered to unpick reserves

October 20, 2021 Coin Telegraph

Mashinsky says USDT is minted for crypto as M bounty offered to unpick reserves

Alex Mashinsky

Hindenburg Research is offering a $1 million bounty for information on Tether’s reserves, with the firm stating that Tether is yet to disclose virtually anything “about its counterparties.”

A bounty of up to $1 million has been offered up to anyone who can cast light on the precise backing of Tether’s reserves.

That backing just got a little bit murker, after Celsius Network CEO Alex Mashinsky reportedly said that Tether mints new USDT in exchange for crypto assets — which appears to conflict with Tether’s own terms and conditions.

"Forensic financial research" firm Hindenburg Research tweeted on Oct. 20 to its 171K followers that it holds "doubts about the legitimacy of Tether," and offered a reward of up to $1 million for important details on Tether’s reserves which it claims could pose a threat to investors on a “systemic” scale.

“Tether is a key underpinning of the multi-trillion-dollar crypto market. Yet despite its repeated claims of transparency, its disclosures around its holdings have been opaque.”

“The company claims to hold a significant portion of its reserves in commercial paper yet has disclosed virtually nothing about its counterparties,” Hindenburg Research added.

But, as more than a few observers noted, $1 million isn’t a lot of money to dish the dirt on a token with a $70 billion market cap.

Tether will gladly pay you 10 times this in Tethers to keep your mouth shut, I’d bet https://t.co/CSgei3yWIx
— Cas “Mildly Interesting” Piancey (@CasPiancey) October 19, 2021

Tether has been the subject of intense scrutiny, with regulators taking action against the firm on multiple occasions over the composition of its reserves. In May Tether published a loose reserve breakdown in May which showed a large amount of unspecified commercial paper, along with minimal cash or bank deposits.

On Oct. 15 Tether and its sister company Bitfinex reached a settlement to pay $42.5 million to the Commodity Futures Trading Commission, which claimed Tether did not have sufficient cash reserves for two thirds of the period between 2016 and 2018.

Tether settled but it denied the claims noting there was “no finding that Tether tokens were not fully backed at all times—simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times.”

It went on to say: “As Tether represented in the Order, it has always maintained adequate reserves and has never failed to satisfy a redemption request.”

Meanwhile Celsius CEO Alex Mashinsky is facing his own regulatory issues after the New York Attorney General’s office began looking into his firm and another stablecoin lending platform this week.

In a subsequent interview, Mashinsky told the Financial Times on Oct. 19 that as part of a lending agreement, Tether minted new USDT tokens in exchange for digital assets:

“If you give them enough collateral, liquid collateral, Bitcoin, Ethereum and so on . . . they will mint Tether against it.”

“New USDT is issued for such loans,” he added, stating that the new USDT is later destroyed after the loan is closed in order to not “permanently increase USDT in circulation”.

Such a lending structure on the face of it would appear in violation of Tether's terms of service which state:

“Tether will not issue Tether Tokens for consideration consisting of the Digital Tokens (for example, Bitcoin); only money will be accepted upon issuance.”

Bitcoin bulls at risk? Tether growth rate flatlines despite market cap crossing $64B

August 18, 2021 Coin Telegraph

Bitcoin

The market capitalization of the world’s largest stablecoin received a boost despite facing regulatory threats in the United States.

Tether Holdings Ltd, the issuer of the largest stablecoin, Tether (USDT), reported that its total market capitalization had crossed $64 billion for the first time in history.

The company called the event a “milestone,” adding that it is another indication of the cryptocurrency market’s “continued trust and confidence” in its stablecoin.

Tether’s $USDt market cap hits $64B!

A new milestone reached and another indication of the market’s continued trust and confidence in #Tether ! pic.twitter.com/t85i6e6UQt
— Tether (@Tether_to) August 16, 2021

In detail, Tether’s business model revolves around providing digitized dollars to cryptocurrency traders and investors. In doing so, the company offers them a way to park their volatile digital assets into USDT, a digital asset that maintains a one-to-one peg to the United States dollar.

As a result, Tether assists crypto traders and investors cut through the hassle of transferring their digital asset sale proceeds to a bank account.

The company’s business model has secured itself in the crypto industry, insomuch that trades between Bitcoin (BTC) and USDT are typically twice as frequent as trades between Bitcoin and the U.S. dollar.

Signaling crypto demand

Tether officials have earlier clarified that its fresh USDT issuances take place to meet orders from customers.

Therefore, a rising USDT market cap indicates that traders and investors may want to purchase the stablecoin and deploy it to purchase digital assets such as Bitcoin and Ether (ETH) and/or put them into yield farming contracts to earn annualized returns.

47,073,663 #USDT (47,073,663 USD) transferred from Compound Tether to unknown wallethttps://t.co/FC5ZjNLnRf
— Whale Alert (@whale_alert) August 18, 2021

A rising Tether issuance rate typically coincides with spikes in the Bitcoin market. For instance, the total market cap of USDT was around $4 billion in March 2020 but rose to over $61 billion in May 2021. The same period witnessed Bitcoin rising from below $4,000 to almost $65,000.

*Bitcoin price versus USDT issuance. Source: LongHash*

Moreover, Bitcoin’s correction from $65,000 to $30,000 coincided with a flat Tether market cap.

Later, BTC recovered on new endorsements from Tesla’s Elon Musk and Twitter’s Jack Dorsey and fears of higher inflation led by the U.S. Federal Reserve’s loose monetary policies.

Meanwhile, Glassnode data reports that 20% of Tether’s supply is currently locked in decentralized finance projects’ smart contracts.

*USDT supply in smart contracts (pink) vs. rival USDC (green). Source: Glassnode*

“I foresee Tether continuing to virtually ‘print’ (mint) more and more Tether as the crypto industry continues to grow,” Gustavo De La Torre, business development director at N.exchange, said, hinting at a potential market boom that may follow in the sessions ahead.

“The growing supply indicates that the crypto ecosystem believes in its own system, carving out a means to peg trading pairs with an asset other than the US dollar.”

Commercial holdings

In June, JPMorgan Chase analysts noted that Tether’s large commercial paper holdings show that banks are unwilling to take the company’s cash. That could be due to the U.S. Office of the Comptroller of the Currency’s guideline that orders banks to work with only stablecoin issuers whose coins are 100% backed by reserves.

*Tether reserve allocations from May report. Source: Tether*

The banking giant added that providing Tether banking services would “likely raise reputational risk concerns” for financial institutions. However, Stuart Hoegner, general counsel at Tether, rubbished JPMorgan’s outlook, stating:

“With respect to reputation, we believe we are seeing the opposite: more and more counterparties are comfortable with Tether and our transparency initiatives and are keen to work with us.”

Regulation watch

Tether’s $64-billion “milestone” also appears as stablecoins, in general, attract more intense scrutiny from regulators.

The U.S. Treasury Department, the Securities and Exchange Commission and the Federal Reserve have expressed their concerns about the potential of dollar-pegged digital assets to cause global financial instability and obscure transactions associated with money launderers and other online criminals.

But to De La Torre, crypto traders have ignored regulatory threats over stablecoins’ feasibility as a product. He said:

“Should regulatory pressure heighten, other well regulated stablecoins like USDC may dominate American markets, however, Tether will still be relevant in other regions of the world.”

Bob Reid, CEO and co-founder of Everest, also highlighted Circle’s USD Coin attempt to mousetrap the U.S. market by attempting to get a national banking charter. The executive noted that Tether might follow a similar path to gain legitimacy in the U.S. or be ousted from the country altogether.

“Tether risks befalling in the same way as Binance, a shunned nomad with half the governments of the world hating them,” he told Cointelegraph.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Tether Reserves