Documents released by New York’s attorney general reveal that Tether Holdings Ltd., the issuer of the world’s largest stablecoin, USDT, used to include securities issued by Chinese companies in its reserve portfolio. The revelation confirms what many had speculated for years, but some key details have yet to emerge.
Reserve portfolios are the collection of assets that support a stablecoin’s value. Reserves aim to keep a 1:1 value with the underlying asset. In the case of USDT, the pegged asset is the US dollar.
Tether FUD on the Rise
According to a Bloomberg report on Friday, documents presented by New York Attorney General Letitia James show that Tether has held securities from prominent state-owned Chinese firms. The securities in question matured in 2020 or 2021. However, the timeframe of Tether’s holdings remains unknown.
In response to widespread reporting, Tether issued a statement condemning the coverage.
“Ultimately Bloomberg, CoinDesk or any other media outlet’s decision to present this information to its readers was likely done in haste with little attention to current events or facts. We do not condone this behavior.”
The stablecoin maintains that its exposure to Chinese commercial paper was primarily in the banking sector, with all holdings being liquid and issued by reputable international issuers. These issuers were stable, and the Chinese commercial paper held a rating of A1 or better.
Tether also emphasized that it cut its commercial paper holdings down to zero last year and did not incur any losses on the papers.
The stablecoin issuer has long had to battle rumors and speculation about its reserves. Almost exactly one year ago, Tether released another forthright blog condemning the hearsay. The entry read, in part:
“Tether 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.”
Tether Depegged This Week, Ardoino Called It an Attack
For Tether, the revelations come during a week that already had its fair share of controversy. Earlier in the week, Tether’s USDT deviated from its US dollar peg. Tether’s CTO, Paolo Ardoino, made forceful statements, claiming the issuer fell victim to a planned attack.
Ardoino assured holders that Tether was resilient and would emerge stronger. The depegging stemmed from an imbalance in Curve’s 3pool, with USDT’s price falling to around $0.997.
Tether (USDT) dominates the stablecoin market as the most popular and widely used stablecoin, comfortably surpassing its rival USD Coin (USDC). Upon its launch in 2014, it was the first stablecoin to enter the market. It currently has a market cap of approximately $83 billion, according to CoinMarketCap.
Since its launch, stablecoins have become a crucial part of the crypto ecosystem. They are also a key component of decentralized finance (DeFi). Stablecoins facilitate seamless transactions, provide liquidity, and curb exposure to price volatility.
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