The world’s largest US dollar stablecoin, Tether (USDT), today announced its first attestation report in six months. The report disclosed that Tether had decreased its commercial paper holdings – short-term commercial debt – by 17% from December 2021 through March 2022, from $24.2B to $19.9B.
Tether said it has decreased its commercial paper holdings by a further 20% since the start of April. That would mean that about $16B of commercial paper backs the $74 billion stablecoin. The attestation, from accountancy firm MHA Cayman, said that USDT is backed by assets that amount to at least $83 billion.
Tether replaced much of the commercial paper with U.S. treasury bills – debt from the U.S. government – and a “significant average maturity reduction with [a] focus on more short-term assets.” The company has also increased the average quality of its commercial paper from A-2 to A-1. A-1 is commercial paper issued by companies that ratings agencies believe are the least likely to default on their debt payments.
“This latest attestation further highlights that Tether is fully backed and that the composition of its reserves is strong, conservative, and liquid. As promised, it demonstrates a commitment by the company to reduce its commercial paper investments,” said Paolo Ardoino, the CTO of Tether, in a statement.
Unlike traditional money market funds, Tether has never disclosed whose commercial paper it holds. This means that investors do not know if the backing is well-diversified, and what kind of financial crash could wipe out the stablecoin. Ardoino told the Financial Times has disclosing Tether’s backing would reveal its “secret sauce”.
The second most popular stablecoin, USDC, is backed entirely by “cash and short-dated U.S. government obligations.” Up until its collapse, UST was backed by the confidence that an associated network token, LUNA, would help prop up the token. When Terra’s US dollar stablecoin, UST, depegged this month, so did Tether, which slid to $0.95 before regaining parity with the US dollar.