Tether announces changes in USDT’s backing

Tether, issuer of the largest stablecoin in the cryptocurrency market, USDT, announced changes to the basket of assets that support the stablecoin’s backing.

Although Tether claims that its cryptocurrency is backed in dollars, since 2019, responding to a lawsuit filed by the New York Attorney’s Office, it has been revealed that there is not 1 dollar for every 1 USDT issued.

Instead, to secure the backing of its stablecoin, Tether claims that it has a basket of assets, which also includes stocks, cryptocurrencies and other assets.

Tether’s reserves have been the subject of heated debate for years, with some critics arguing that its stablecoin could be a Ponzi scheme of massive proportions.

In May of last year, Tether officially published a breakdown of the reserves supporting its stablecoin for the first time.

As the company revealed at the time, 65.39% of USDT’s reserves were backed by unspecified commercial paper, a form of short-term debt issued by companies to raise funds.

However, the revelation failed to allay concerns about USDT’s sustainability. After all, it was unclear which companies issued the commercial paper that made up the majority of Tether’s reserves.

Tether backing changes

Now, amid changes in USDT’s backing, Tether has revealed that it plans to further reduce commercial paper reserves. However, it did not reveal which asset this money will be allocated to.

If the company fulfills the promise made in the announcement, this will be the second reduction in reserves for Tether, which late last year announced that it had reduced its holdings in commercial paper by 21%, substantially increasing the share of Treasury bonds.

Today, commercial debt comprises less than a third of the company’s reserves.

JPMorgan analysts recently opined that Tether was having a hard time finding a bank that was willing to take deposits from Tether based on the composition of its reserves.