Since the collapse of the Terra ecosystem through the UST depeg, stablecoins have been experiencing a crisis of confidence from the community. The company Tether, issuer of the stablecoin USDT, has finally revealed its quarterly report from the beginning of the year (period from the beginning of January to the end of March) carried out by the accounting firm, MHA Cayman, independently.
This report is all the more important as it should reassure Tether users of its ability to withstand high volatility by maintaining its peg to the dollar. In practical terms, these certificates are intended to provide guarantees on the quantity and composition of the reserves backing the USDT. In the past, the company was not necessarily reassuring on this subject.
Indeed, when it first communicated on this subject, 50% of the assets held by Tether were composed of commercial paper. These assets are known to be particularly risky, especially since Tether was unable to communicate the rating of the majority of these securities. Faced with this situation, members of the community, wishing to verify the real creditworthiness of Tether, strongly reproached the company for these points.
As a result, as the quarterly reports progressed, the rate of commercial paper held was reduced to only 31% in the company’s latest official communication. Indeed, this report should confirm this momentum while providing greater transparency on the composition of new assets purchased by the company to ensure the fairness of its stable corner.
It should be noted that last week, the amount of USDT redemptions led to an 11% reduction in the number of Tether in circulation from 83.2 billion to 74.2 billion. Yet the higher the redemption demand, the more the reserves to ensure the stability of the stablecoin are depleted. So what’s really going on with Tether?
Tether reassures on its dollar reserve
As expected, Tether has significantly reduced its investment in commercial paper. Indeed, the company confirms the trend by reducing its holdings of these assets by 17% from USD 24.2 billion to USD 20.1 billion. Furthermore, they claim to have reduced them by a further 20% since 1 April.
This decrease is mirrored by an overall increase in US Treasuries of 13% from $34.5 billion to $39.2 billion.
Treasury bills are known to be much safer as they carry zero risk. However, given the current period in the global economy, legitimate questions can be raised about this risk.
Finally, the average rating of CP (Certificate of Deposit) and CP (Commercial Paper) decreased from A-2 to A-1 and secured loans decreased by USD 1 billion.
In the end, the total consolidated assets held by Tether amount to $84,424,821,101 allowing the company to have consolidated assets of the group exceeding its consolidated liabilities.
Tether promises increased transparency
Commenting on the release of the report, Tether’s CTO Paolo Ardoino praised the company for building a strong, conservative and liquid pool.
He added that “this past week is a clear example of Tether’s strength and resilience. Tether has maintained its stability in the face of multiple black swan events and highly volatile market conditions and, even in its darkest days, Tether has never failed to honour a redemption request from one of its verified customers.
The lack of information about the actual stability of a stablecoin is a major issue. Tether has the slowest attestation schedule of stablecoins. In response, Tether’s boss promises a continued commitment to transparency.
However, if the company does not change the publication deadlines soon, it could face another crisis that is equally important for its competitiveness: that of the information drought.