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Tether cuts USDT exposure to risky assets by 50%

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During a recent event on Twitter Spaces, the CEO of Tether Limited announced news regarding the company’s stablecoin. According to Paolo Ardoino, Tether decided to cut its exposure to corporate papers in half.

As a result, the stablecoin backing will, in theory, be safer. The portion that was withdrawn from commercial paper will be allocated to US government bonds.

“Over the past six months, [Tether] reduced the size of commercial documents by 50% (sic). Everything that was reduced from commercial papers was rolled into US treasuries. In the coming weeks, we will have the new attestation that will show that these business documents are being reduced,” he said.

Tether cuts USDT exposure to Commercial papers by 50%

Commercial papers are a type of asset for large companies to pay for short-term debt obligations. In general, they are debt securities issued with the aim of raising money.

In 2021, these papers represented a real controversy for Tether. At the time, 76% of USDT’s backing consisted of this type of investment. In addition, the market speculated that part of these papers would have been issued by the Chinese developer Evergrande.

Although never proven, the rumor has raised suspicions about USDT’s safety. Evergrande had enormous debt (in the region of US$ 300 billion) and was in danger of defaulting. That is, if the company went bankrupt and Tether was exposed to its shares, USDT could collapse.

As such, Ardoino’s announcement appears to aim to reassure the market and make USDT safer. According to transparency website of Tether, cash, cash equivalents, short-term deposits and commercial paper make up 83.74% of USDT’s backing.

About 37% of the percentage mentioned above is made up of commercial paper and certificates of deposit. US Treasury bonds represent approximately 52%. However, these data are for the month of December, that is, if Tether reduced its exposure by 50%, commercial papers should represent around 18.5% of the current backing.

USDT’s current backing includes, in addition to cash and bonds, other cryptocurrencies, bonds, corporate bonds, precious metals, cash and cash equivalents, according to Tether’s transparency report.

In the past, Tether has been heavily criticized for the opacity of its operations. The company has repeatedly refused to subject itself to a public audit of the backing of its stablecoin. But the company created the transparency website, where it publishes its backing data and audit documents.

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