The long-controversial stablecoin issuer, Tether, has taken steps to reduce the market uncertainty and risk surrounding the crypto market’s largest stablecoin, USDT.
In an interview with CNBC today, the chief technology officer of both Tether and Bitfinex (owned by the same parent company), Paolo Ardoino, highlighted the “enormous steps” that the stablecoin issuer has taken to increase transparency as well as to “dramatically reduce” its exposure to commercial paper. He mentioned that his firm sends its attestation reporting quarterly to the Attorney General’s office of New York.
Ardoino stated that Tether had reduced its exposure to commercial papers by 21% in the quarter just ended and that Tether would continue to reduce its commercial paper holdings. The CTO stated that Tether’s decreasing commercial paper reserves would now be replaced by U.S. Treasury bond.
Tether currently does not disclose the names of the companies it holds commercial paper, but it does provide ratings. Ardoino said that the “vast majority” of its commercial debt holdings were rated A2 or better, credit considered minimally risky.
Stablecoins issued by centralized companies, such as Tether’s USDT, as opposed to decentralized or algorithmic stablecoins, such as DAI, which is managed via the Maker Protocol and the MakerDAO, are backed, theoretically, by assets that are more stable than cryptocurrencies (e.g. Bitcoin and Ethereum. This would include the U.S. dollars. Stablecoins can be used for lending and trading, just like their name.
Tether was fined $41million by the Commodity Futures Trading Commission last October for making misleading claims about USDT’s full backing by dollars. This fine was preceded by widespread allegations that Tether held billions of dollars worth of Chinese companies’ debt in the form of commercial paper. Tether Holdings, which claimed that its stablecoin was 100% backed by dollars, was also subject to a class-action lawsuit last December. It was its second lawsuit in as much time.