Tether Cuts Commercial Paper Reserve by 17%

Tether published a blog post indicating that the company has adjusted its reserve assets and a new report showed it continued to reduce commercial paper.

 

After briefly losing its peg last week, Tether has been the center of renewed doubts as to whether its reserves back the assets in circulation.

 

The company now released a new report, detailing that its reserve allocation to commercial paper investments has been cut. Of the $82 billion reserves, 86% are in cash and cash equivalents. Only $4 billion are in corporate bonds, with $5 billion in investments like cryptocurrencies, and $3 billion in secured loans. In total, Tether holds 52% US Treasury bonds, 37% commercial paper, with the rest in cash and money market funds.

 

That marks a significant decrease in commercial paper, from $24 billion to $20 billion in the first quarter of 2022. An additional 20% reduction is to show up on the company’s Q2 report.

 

CTO Paolo Ardoino commented:

 

“Tether has maintained its stability through multiple black swan events and highly volatile market conditions and, even in its darkest days, Tether has never once failed to honor a redemption request from any of its verified customers. This latest attestation further highlights that Tether is fully backed and that the composition of its reserves is strong, conservative and liquid.”

 

Tether has been consistently increasing its cash and cash equivalent reserves after Evergrande, a Chinese real estate developer, almost missed a US Treasury Bond payment in September 2021. Back then, Tether’s commercial paper reserves were still significantly higher, with Evergrande featuring among them. That prompted market fears that Tether might not be able to honor its commitments.

 

However, Tether did include a disclaimer in its report, stressing that asset valuations reflect “normal trading conditions:

 

“The valuation of the assets of the Group have been based upon normal trading conditions and do not reflect an unexpected large-scale sale of assets, or the case of any key custodians or counterparties defaulting or experiencing substantial illiquidity, which may result in materially different or delayed realisable values. No provision for expected credit losses was identified by management at the financial reporting date.”

 

The report was accompanied by comments on the failure of UST from Tether’s CTO Paolo Ardoino. During a podcast this week, Ardoino called LUNA “poorly designed” and a “castle of cards” that was going to collapse, even if Do Kwon had no malicious intent.