{"id":968,"date":"2022-06-30T11:34:00","date_gmt":"2022-06-30T11:34:00","guid":{"rendered":"https:\/\/grandpascrypto.com\/?p=968"},"modified":"2022-06-28T23:38:43","modified_gmt":"2022-06-28T23:38:43","slug":"usdt-fud-continues-company-commits-to-full-audit","status":"publish","type":"post","link":"https:\/\/grandpascrypto.com\/usdt-fud-continues-company-commits-to-full-audit\/","title":{"rendered":"$USDT FUD Continues, Company Commits to Full Audit"},"content":{"rendered":"\n

tl;dr Summary: <\/em><\/strong>The latest source of Fear, Uncertainty and Doubt (FUD) surrounding crypto\u2019s biggest stablecoin, $USDT, is in relation to its commercial paper reserves. Tether has come out in a statement to fiercely deny speculation related to the origin of this commercial paper, and has finally committed to a full audit of reserves!<\/em><\/p>\n\n\n\n

Tether, $USDT, is cryptocurrency\u2019s largest stablecoin<\/a>. It is also the third-largest cryptocurrency by market cap, which currently sits around $66 billion. $USDT is a fiat-backed stablecoin, meaning the one-dollar peg is maintained by physical reserves of US dollars. Indeed, in the initial Tether whitepaper<\/a> it was claimed that USDT could only be issued when customers deposit fiat dollars to Tether. This claim has been highly controversial<\/a>, and the intense speculation related to the transparency of $USDT and the coin\u2019s reserves is seemingly never ending.<\/p>\n\n\n\n

Despite a prolonged reluctance to publicly disclose their holdings, Tether finally began to release \u2018assurance reports\u2019 in March 2021, produced by independent accountant MHA Cayman. The most recent assurance report<\/a>, in March 2022, attested that 86% of Tether\u2019s $82 billion on 31st<\/sup> March was held in cash and \u201ccash equivalents\u201d. It is the use of cash equivalents that is the latest source of controversy with Tether, as this term encompasses both US government debt (treasury bonds<\/a>) and more controversially, commercial paper.<\/p>\n\n\n\n

Commercial paper is essentially short-term debt, created by loaning money to private companies. Companies generally use this money to meet short term financial obligations, and then pay this back at a predetermined time, when their cash flow is improved. Although treasury bonds are generally considered safe, the security of commercial paper obviously depends on the company which you are loaning the money to. For those familiar with Tether and the crypto industry as a whole, it is unsurprising to hear that rumors have been circling suggesting that Tether\u2019s commercial debt was far from \u2018A-grade\u2019\u2026<\/p>\n\n\n\n

On Jun 15, Tether released a statement<\/a> around rumors claiming its commercial paper holdings:<\/p>\n\n\n\n

\u201cTether is aware of rumours being spread that its commercial paper portfolio is 85% backed by Chinese or Asian commercial papers and being traded at a 30% discount. These rumours are completely false and likely spread to induce further panic in order to generate additional profits from an already stressed market.\u201d<\/em><\/p><\/blockquote><\/figure>\n\n\n\n

The statement went on to reference Tether\u2019s most recent assurance report<\/a>, which recognises that 47% of $USDT reserves are now US treasuries, with commercial paper making up less than 25% of reserves. It is planned to gradually reduce commercial paper holdings to zero and \u2018roll\u2019 these into short term US treasuries upon their expiration.<\/p>\n\n\n\n

It seems that Tether is an easy target for FUD and recent news surrounding troubled CeFi platform Celsius<\/a> and likely insolvent crypto hedge fund Three Arrows Capital<\/a> has led to rumors of USDT\u2019s involvement with both parties. Tether stated they had \u201czero exposure\u201d to Celsius other than \u201ca small investment\u201d made out of Tether equity, and that any rumors about lending exposure to Three Arrows Capital were \u201ccategorically false.\u201d<\/p>\n\n\n\n

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Tether’s falling market cap.<\/figcaption><\/figure>\n\n\n\n

Despite Tether\u2019s attestations, $USDT\u2019s market cap has been consistently falling since the collapse of TerraUSD<\/a>, shrinking almost $17 billion from a high of $83 billion in May 2022. Considering the market cap of rival stablecoins like $USDC have increased during the same time period, this clearly represents a lack of consumer confidence in $USDT. Tether CTO Paolo Ardoino referenced the coin\u2019s shrinking market cap on Twitter, however viewed it as a sign of strength, referencing the fierce volatility that followed TerraUSD\u2019s implosion:<\/p>\n\n\n\n

\u201cIn 48 hours Tether processed 7B in redemptions, averaging 10% of our total assets, something almost impossible even for banking institutions.\u201d<\/em><\/p>\n\n\n\n

In the thread, Ardoino responded to claims that traditional hedge funds had been orchestrating coordinated attacks to short $USDT. He emphasized Tether\u2019s ongoing reduction in commercial paper and increasing transparency, concluding that the \u201cTether portfolio is stronger than ever.\u201d<\/p>\n\n\n\n

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In more than one month Tether processed 16B in redemptions (~19% of our total reserves), again proving that our operations, portfolio, banking infrastructure and team are solid and battle tested.<\/p>— Paolo Ardoino (@paoloardoino) June 27, 2022<\/a><\/blockquote>