Tether Announces Reduction In Commercial Paper Reserves

Tether’s commercial paper holdings have been reduced by 17% as the company seeks to improve the quality of its reserves.

In its Consolidated Reserves Report released Thursday, the company indicated that it had reduced its commercial paper holdings from USD $24.2 billion to USD $20 billion during the first quarter of 2021.

As of March 31, the end of the first quarter, Tether’s reserves were USD $82 billion of which 86% consisted of cash and cash equivalents. The remainder included $4 billion in corporate bonds, $3 billion in secured loans, and $5 billion in other investments such as cryptocurrencies, according to the report.

The cryptocurrency issuer said that it had reduced its cash deposits and increased its holdings of US Treasury bonds. According to the latest reports, Tether’s cash went from USD $4.2 billion to USD $4.1 billion, while bonds from USD $34.5 billion to USD $39.2 billion.

Other assets in the company’s reserve did not seem to vary much. As reviewed by that media outlet, the “Other investments” category, which includes cryptocurrencies, has remained constant, falling slightly from USD$5.02 billion to USD$4.96 billion. Although Tether has not disclosed which assets specifically make up this category, which has generated some uncertainty among investors and traders.

The announcement came just days after Tether delinked itself from its bank accounts at Puerto Rican Noble Bank—a move that raised questions about the company’s financial viability.

Tether said it would be using the funds freed up by this reduction to purchase more U.S. Treasury bonds, as well as put more cash into its reserves that can be accessed in case of emergencies or other issues that arise with its commercial paper program.

Depeg fears

The release and Thursday’s statements from Tether’s CEO Ardoino arguably seek to address widespread investor fears of a potential USDT delinking. The largest stablecoin by market capitalization, which is expected to maintain a stable price of $1, momentarily lost parity last week, touching 97 cents.

The unpegging of Tether came amid the plunge of Terra’s stablecoin algorithmic currency $UST, which lost its parity with the U.S. dollar. Since then, USDT’s market capitalization has fallen by nearly USD$9 billion amid increased liquidations of the asset and a broader correction scenario in the cryptocurrency market.