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Tether cuts commercial paper holdings, says majority of exposure in Treasuries -CTO

By on May 12, 2022 0

The smartphone with the Tether logo is placed over US dollars displayed in this illustration taken May 12, 2022. REUTERS/Dado Ruvic/Illustration

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LONDON/NEW YORK, May 12 (Reuters) – Tether, the third-largest cryptocurrency by market capitalization, said the majority of its reserves were in U.S. Treasuries after cutting exposure to commercial paper over the past six months, its chief technology officer said. Officer Paolo Ardoino said Thursday in a Spaces Twitter chat.

Tether, a reserve-backed stablecoin that is believed to be pegged 1:1 to the US dollar, fell as low as 95 cents earlier in the global session, according to price data from CoinMarketCap. It was the last one at 99 cents.

Stablecoins are cryptocurrencies designed to be protected from volatility that makes it difficult to use digital assets for payments or as a store of value. Read more

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Ardoino did not specify what proportion of the reserves is currently held in commercial paper, but said it “continues to decline” and that a quarterly reserve update will be available later in the month.

Joseph Abate, managing director, fixed income research, at Barclays, said investors feared that, in a financial race, Tether could be forced to sell its holdings in order to meet redemptions.

“Money market investors fear that if Tether is pressured to sell off its CP (commercial paper) and CD (certificate of deposit) holdings, these normally illiquid markets could crash, as they did in March 2020,” he wrote in Thursday’s research note. .

He cited figures from December 2021 showing that Tether held $24 billion in CP, or around 31%.

That said, Abate pointed out that liquidity fears may be premature because the bulk of Tether’s holdings, 44%, are liquid treasuries. He also has other short-term assets that can be easily sold the same day, he added.

Tether also said on Thursday that it continues to honor redemptions as normal. In the past 24 hours, Tether has honored over 300 million redemptions and is already processing over $2 billion as of Thursday without issue.

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Reporting by Samuel Indyk and Elizabeth Howcroft in London and Gertrude Chavez-Dreyfuss in New York; Editing by Saikat Chatterjee and Chris Reese

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