In a recent blog post published on its website, Tether revealed that it has now reduced its commercial paper holdings to zero and replaced them with US Treasury Bills. Although it might not be as well-known as Bitcoin in mainstream circles, there are now around 68.4 billion Tether tokens in circulation, an increase of approximately 2 billion from three years ago. Moreover, the cryptocurrency has a market capitalization value of $68.4 billion, which in itself is pretty impressive.
The Lowdown on Tether
Launched by the company Tether Limited Inc. back in 2014, this asset-based cryptocurrency stablecoin is owned by iFinex Inc., a Bitfinex cryptocurrency exchange headquartered in Hong Kong.
It’s considered the world’s leading stablecoin and is so widely used that crypto aficionados have been using it for years to supplement their cryptocurrency trades. USDT is fixed to the US dollar and technically shouldn’t be affected by market fluctuation that may so significantly affect other cryptocurrencies’ worth.
Apart from its weight in the market and investment, Tether enthusiasts also use Tether for leisurely activities such as online gambling. Unarguably one of the best methods of payment, it offers players the convenience of top-tier cryptocurrencies. Better than that, perhaps one of Tether’s biggest advantages is the fact that it’s a stablecoin. So, as the name itself implies, it provides users stability in that it provides peace of mind because they needn’t worry about volatility. With so many crypto-friendly online casinos out there. After looking up a multitude of licensed providers, we found that the BitKingz Casino no deposit bonus not only allows players to enjoy hundreds of slot titles and casino table games. Plus, with so many payment options available – including, of course, Tether, you know it’s a casino that puts its players at the forefront!
Another significant point worth taking note of is that Tether has set itself apart from other cryptocurrencies by leading the industry in terms of transparency by releasing attestations every three months in an attempt to constantly review the makeup of its reserves.
The Rationale Behind Tether’s Move Away From Commercial Paper Holdings
In the crypto world, commercial paper holdings are a form of short-term, unsecured debt issued by companies. It is generally considered to be considerably less reliable than Treasury bills. Earlier this month, Paolo Ardoino, the Chief Technology Officer at Tether put out a tweet that stated that 58.1% of its assets were in Treasury bills which had increased considerably from June when the figure stood at just 43.5%.
Although it is unclear what the percentage is at present, Ardoino has said that Tether is now able to pay USD 7 billion, or 10% of its reserves, in 48 hours. Not many banks or other stablecoins can claim to do that in the same short period.
Ultimately, zeroing out the balance of Tether’s commercial paper holdings is a significant move towards increasing transparency and building trust. This has positive implications not just for Tether but for the entire stablecoin industry, especially bearing in mind that this sector of the crypto market has suffered in the last year because of trust issues.
Trust Issues Within The Stablecoin Industry
Unfortunately, the stablecoin industry has been undermined by constant trust issues. For example, in 2021, Tether was issued a multimillion-dollar fine due to a legal battle the company fought against the New York attorney general’s office with regard to the viability of its reserves.
Similarly, in May this year, we saw the complete collapse of terraUSD (UST), which has been one of the most popular stablecoin projects, resulting in losses for investors that amounted to tens of billions of dollars. Furthermore, the collapse of UST had a dominion effect across the wider crypto network, with Tether temporarily losing its dollar peg and dropping as low as USD 0.95 at one point in time.
Tether’s Broader Problems
Even before UST’s collapse, Tether faced a serious regulatory backlash regarding its reserves. While most stablecoins are backed by fiat reserves which provide enough collateral in the event that users suddenly decide to withdraw their funds, UST was one a new breed of ‘algorithmic’ stablecoins that had attempted to base their dollar peg on code instead.
Although Tether had once claimed all its were backed on a one-to-one basis by dollars at the bank, after they had paid the settlement after the case against the New York attorney general, the company revealed that it had, in fact, relied on a broad range of other assets, including commercial paper holdings to support the value of its token. According to the attorney general’s office, Tether was alleged to have at times held no reserves to back its dollar peg. Furthermore, it is believed that since mid-2017, Tether actually didn’t have any access to banking, so it had misled clients with regard to liquidity. Moreover, critics have even expressed fears about Tether tokens having been used to manipulate bitcoin prices.
The Future of Tether and US Money Markets
While it is hoped that this move to replace commercial paper holdings with US treasury bills will be a step in the right direction in terms of transparency within the crypto markets, it is too soon to determine whether this will indeed be the case.
At present, Tether is not prominent enough to cause any real disruption to the US money markets, however, were it to eventually reach a size whereby its ownership of US treasury bills was larger, the reality could be quite profound. If this were to ever be realized, then a crash in the tether markets could have substantial implications for the US money markets, which in turn could cause the global economy to go into recession too!
