Tether to shrink commercial paper holdings for USDT reserves
Tether, the issuer of the USDT stablecoin, has announced plans to reduce its short-term corporate debts used to back the value of USDT. USDT is a stablecoin whose value is pegged to $1, and its price stability is guaranteed by the asset being fully backed.
Tether (USDT) plans to lower commercial debt
The Chief Technology Officer at Tether, Paolo Ardoino, noted that the debt reduction process would happen in phases. The company’s commercial debt would be reduced gradually until Tether was satisfied with the results.
The USDT stablecoin has been scrutinised by regulators and even the crypto community. Some crypto community members have argued that the stablecoin is not fully backed by external assets as the company claims. There have also been questions about the assets used by Tether to back its stablecoin.
In 2021, Tether announced acquiring commercial papers as USDT reserves. Before this, Tether claimed that USDT was 100% backed by fiat reserves, bringing more scrutiny to the company. The US Commodity Futures Trading Commission imposed a $41M penalty against Tether over graft charges in 2021.
The CFTC stated that Tether was knowingly misguiding its users and that the statements about the USDT reserves were false. Arduino has now said that the company has been offloading its short-term debts since 2021. By the last quarter of 2021, the USDT reserves held in short-term debts dropped to 30%.
However, USDT remains under scrutiny, and as the US regulatory framework changes, the company could be forced to provide documents showing how USDT is fully backed. The New York Attorney General issued an order to the company asking it to provide a comprehensive report indicating the assets used to back the value of USDT.
Tether gains adoption
Despite the controversy, USDT continues to gain overwhelming adoption from users. It is currently the largest stablecoin by market cap and trading volumes. Recently, Tether expanded to the Kusama canary network to unveil support for USDT.
Leading blockchains in the sector have already integrated USDT. These blockchains include Ethereum, Solana, EOS, Algorand, Tron and Omni.
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