Overview of Tether’s Reserve Changes
Tether, the stablecoin issuer behind USDT, recently made headlines by reducing its commercial paper reserves by over 20% from September to December last year. The number dropped from approximately $30.5 billion to around $24.16 billion. This adjustment raises eyebrows and questions about the stability and transparency of the USDT ecosystem.
Legal Obligations and Reserve Transparency
Since an $18.5 million settlement with the New York Attorney General in February 2021, Tether has been legally required to disclose its reserves quarterly. This was initiated after allegations emerged suggesting that Tether misrepresented the amount of fiat backing USDT in the years 2017 and 2018. As such, stakeholders are keenly observing Tether’s financial disclosures, especially in light of its most recent attestation.
Latest Reserve Breakdown
The latest report, conducted by the Cayman Islands-based firm MHA Cayman, provided a detailed snapshot of Tether’s reserves as of December 31, 2021. The findings showed that Tether’s total assets amounted to $78.67 billion, compared to liabilities of about $78.53 billion. While the assets exceed liabilities, the margin is notably thin, leading to further inquiries about the stability of these reserves.
Shifts in Reserve Makeup
Interestingly, the composition of Tether’s reserves underwent noteworthy changes. Cash and bank deposits saw a staggering decline of 42%, clocking in at just $4.187 billion. In contrast, investments in money market funds surged by 200% to $3 billion. Moreover, Tether’s holdings in Treasury bills increased by 77.6%, reaching $34.52 billion. This pivot indicates a strategic shift in Tether’s asset allocation.
The Commercial Paper Concern
Commercial paper, a form of unsecured debt, has long been a significant part of Tether’s financial portfolio. As of May 2021, approximately 65.39% of Tether’s reserves were backed by commercial paper, which had sparked criticism and concerns among analysts and investors. Questions about the credibility and transparency surrounding these commercial papers remain a hot topic, especially with concerns of exposure to financial crises, such as the Evergrande debacle. Tether has since clarified that it is not affected.
Insight into Maturities and SEC Regulations
Tether’s attestation provided additional details regarding its commercial paper holdings. Out of the total commercial paper, $13.93 billion matures within 0-90 days, $9.94 billion falls within the 91-180 days bracket, and $823 million matures between 181 and 365 days. It’s noteworthy that commercial papers with maturities extending over 270 days are required to be registered with the U.S. Securities and Exchange Commission (SEC).
As Tether continues to navigate the competitive landscape, especially with formidable challengers like USD Coin (USDC) gaining ground, transparency and strategic adjustments to its reserves will be closely monitored by investors and regulators alike.
