Tether report states that USDT is fully backed with 82 billion in reserve

Stablecoin issuer, Tether holdings recently published a blog post, its first attestation report in 6 months, which has that the company's USDT tokens are backed by an asset reserve worth $82.42B.

Over the past few weeks, stablecoins across the crypto market have suffered to varying degrees after TerraUSD's resounding crash. While a few tokens in this asset class, such as USDC and BUSD, remained immune to the ripple effect that followed UST's demise, the world's largest stablecoin was not so fortunate.

Despite the widespread market anxiety USDC was able to evade the depegging phenomenon. One can attribute the stability to firm user trust; this was also helped by the fact that Circle, the company behind USDC, swiftly published an audit to reassure its customers.

Tether has released a similar report, a wise move given the fact that even before the Terra collapse, user trust was lacking. Contributing factors include tussles with the U.S. Securities and Exchange Commission (SEC)and an exaggerated number of reserve assets.

Tether brought in MHA Cayman to give an independent accountant reserves report; the release reportedly paints an accurate picture of the firm's assets for the first quarter of this year as of March 31, 2022.


USDT Tokens Fully Backed

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The assurance report revealed that Tether's USDT tokens are fully backed. According to Cayman, the company's reserve holdings add up to about 82.4 billion USD. Consolidated liabilities for the group amount to about $82.2B, with USDT tokens taking up $82.1B.

Tether's reserves exceed the tokens that are currently in circulation. Essentially, the reserve assets are more than enough to redeem the USDT tokens that have been issued. This is a crucial point considering the recent depegging; Tether is seeking to assure users that it is reliable and, true to its name, stable.

CTO Paolo Ardoino spoke along these lines, noting that despite the panic of the previous week, Tether had held up impressively. The attestation report affirmed that the network's USDT tokens were fully backed, thus increasing faith in the stablecoin's strength and resilience. Ardoino pointed out that Tether has never recorded a failed redemption request, even in extremely volatile market conditions.


A Breakdown of the Reserve Assets

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According to the May 19 publication, a significant portion, 86% of Tether's reserve holdings, is in cash or cash equivalents. This amounts to $70.52B from the total, and the remainder is divided into corporate bonds ($4B), secured loans ($3B), and $5B worth of investments in assets such as virtual currency. Altogether these add up to $82 billion.


The report also broke down the larger percentage of the reserve, that is, the cash and cash equivalents. U.S. Treasury bills make up 52% of this, and commercial paper comprises 37%. The rest of the backing comprises money market funds and fiat currency deposits.

Tether got into a lawsuit over a year ago after New York authorities laid down charges stating that the stablecoin network wasn't fully backed by reserves at certain intervals. The case ended with Tether paying an $18.5 million settlement fee for damages against N.Y. and withdrawing its services from the state.


Part of the settlement term was a quarterly report reflecting the firm's reserve status. The company published 2021's Q4 report in February, and naturally, comparisons have been made; let's look at the major changes since last year's ending.


A Substantial Decrease in Commercial Paper Reserves

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Tether Holdings Limited has come under fire in the past for the nature of the assets that make up its reserve, in particular the firm's use of commercial paper. Commercial paper is unsecured short-term funding supplied by a company.

Commercial papers are unwise assets to use as preserves as they are not easily liquidated; thus, in the event of a crash such as Terra's, they would be hard to dispose of. Tether's Q4 report last year revealed that a significant portion of its holdings were commercial papers.

Over the past few months, researchers frequently pointed out the risk of these holdings; Chief Technology Officer Paolo Ardoino expressed his agreement and shared that Terra was working on cutting them out. Fast forward to this year, and Tether has executed its intentions.

The recent report revealed that the commercial papers in the USDT backing have fallen by 17% quarter-over-quarter. This was the state of the reserve as of March 31; Adriono's more up-to-date statement claims that since April 1, Tether has recorded a 20% decrease. Presently commercial papers account for roughly $20B of USDT's backing funds.

Additionally, the attestation report showed that Tether's investments in money market funds and U.S. treasury bills have grown by over 13%, moving to $39.2 billion from $34.5 billion. Tether is also cutting down on secured loans, which have decreased by $1 billion. Commercial paper and certificates of deposit have seen their average rating rise from A-2 to A-1.


Soon after the Office of the New York Attorney General filed its suit against Tether, it came to light that only about 3% of the USDT reserve was composed of cash despite the company's claims of full backing. Fortunately, as shown earlier, they are, in truth, fully backed now, and Tether has pushed the cash and cash equivalents to a notable 86%.


Tether (USDT) Regaining Trust

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In his statement, Paolo Ardoino spoke briefly about Tether's "ongoing commitment to transparency." Despite the past year and even the past week, Tether maintained its position as the world's largest stablecoin. This is proof that the network has retained a good deal of user trust.

However, the recent depegging shows it still has some way to go, USDT's value fell due to fear amongst investors, but this was not the case with Circle's USDC. The Tether competitor's long-term transparency ensured that user faith remained consistent, and the network's swift assurance was commendable.

Although the settlement terms only enforce the quarterly reports for 2 years, Tether seems willing to continue to publish attestations reflecting progress in the USDT reserve. These reports will function as proof to users that the backing is, as the latest report claims, "strong, conservative, and liquid."



Author: Gate.io Observer: M. Olatunji
*This article represents only the views of the observers and does not constitute any investment suggestions.
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