Understanding Tether’s Shift in Backing Strategy

Tether, the leading stablecoin producer, is making waves with its new strategy to eventually eliminate reliance on commercial paper for backing its stablecoin, Tether (USDT). This decision is pivotal in paving the way for a more secure and transparent financial ecosystem.

Addressing Recent Allegations

Reports have surfaced alleging that 85% of Tether’s commercial paper backing comes from Chinese or Asian sources and is trading at a substantial discount. Tether has strongly rebutted these claims, describing them as “completely false.” According to their official communication, less than 25% of USDT’s reserves consist of commercial paper, with a significant portion—over 47%—now backed by U.S. Treasuries.

The Gradual Reduction of Commercial Paper

In line with their proactive approach, Tether is progressively cutting down its commercial paper holdings. As of now, Tether’s portfolio has been reduced to about $11 billion, with plans to shrink it further to approximately $8.4 billion by the end of June 2022. This strategy is designed to phase out commercial paper completely, with the company optimistic that it can do so without incurring losses.

Strategies for a Smooth Transition

• Expiration and Roll Over: Tether plans to let its existing commercial papers naturally expire, reinvesting the proceeds into U.S. Treasuries.
• No Losses Expected: The firm assures stakeholders that this shift will occur without any financial setbacks.

Clearing the Air: No Exposure to Celsius

Tether has also addressed concerns regarding its exposure to the Celsius lending platform following recent turmoil in the crypto space. Reports suggest that Celsius has faced liquidity issues, but Tether has clarified that it has zero exposure to Celsius aside from a minor equity investment.

Denouncing Misinformation

Additionally, Tether has dismissed speculative reports about its financial ties to Three Arrows Capital, emphasizing that such allegations are “categorically false.” This highlights Tether’s commitment to transparency and accuracy in financial reporting, ensuring trust among its users and investors.