The company Tether Limited behind Tether (USDT), the most popular stablecoin on the market, responded to rumors against it on June 15. These accuse the firm of backing most of USDT’s liquidity with risky assets. With the collapse of all cryptocurrencies and the shutdown of the services of the Celsius exchange platform, trust between players in the industry is being severely tested.
Tether refutes rumors
Rumors about Tether indicate that its stablecoin, a dollar-backed digital currency to provide stability in a highly volatile market, is 85% secured by commercial paper from Chinese or Asian companies. Commercial paper is unsecured commercial paper issued on a short-term basis by another company. They can take several forms: promissory notes, checks, bills of exchange, etc. Thanks to them, companies can borrow from each other, without resorting to bank credit. The major problem with commercial paper is that it does not guarantee compliance with the payment commitment.
Celsius, the cryptocurrency exchange platform, freezes its activities
If the latter decide to no longer donate money to Tether Limited, the company would find itself short of liquidity: investors would no longer be able to exchange their USDT at their face value of one dollar. As a reminder, Tether is the most used stablecoin with a market capital of 67 billion euros, ahead of the USDC and its 52 billion of capital.
The stablecoin issuer defends itself in its press release, “ These rumors are completely false. They are probably intended to be propagated in order to cause further panic and generate additional profits in an already very stressed market. Tether condemns such attempts which often see simple users lose hugely while a few coordinated funds increase their profits “.
To reassure investors, Tether insists that 47% of USDT reserves are backed by the US Treasury and that commercial paper accounts for less than 25% of the stablecoin’s funds. ” Our commercial paper portfolio has been reduced from $20 billion at the end of the first quarter of 2022 to $11 billion and is expected to reach $8.4 billion by the end of June. This amount will gradually decrease until it reaches zero without any loss being incurred. All commercial papers are maturing and will be converted into short-term US Treasuries », Explains the cryptocurrency giant.
A troubled market
With recent events hitting the crypto world, all eyes are on Tether. The biggest fear is seeing the digital currency drift away from the dollar it is backed by. These fears turn out to be legitimate: the price of USDT has been impacted by the collapse of Terra. Its value fell to $0.95 for a while before returning to its original parity.
Tether took advantage of his denial to highlight the stability of his stablecoin despite the turbulence. Tether denied being affected by Celsius’s decision to freeze its operations, ” Celsius’s positions were liquidated without any loss to Tether. Tether’s lending activity with Celsius (as with any other borrower) has always been overvalued. Tether’s exposure to Celsius is currently nil, except for a small investment made by Tether in the company “.
In addition to answering questions around Celsius, Tether responds to questions about Three Arrows Capital. The company refutes all rumors about its exposure to the Singapore-based crypto investment fund. This one which encounters liquidity difficulties and would be on the verge of rupture.
As with traditional currencies, cryptocurrencies are still largely based on the trust of its users. At the heart of an industry in crisis, plagued by a collapse in the value of major cryptocurrencies, Tether Limited is struggling to maintain customer confidence. Without it, the world’s leading stablecoin would risk collapsing, worsening the current recession