Tether, the operator of the USDT stablecoin, mocked speculation Wednesday that the token is backed by low-rated debt.

The company said in a press release that recent “rumours” that the portfolio used to support USDT is made up of Chinese or Asian commercial paper are “completely false.”

It also denied any exposure to beleaguered lender Celsius and crypto hedge fund Three Arrows Capital – both of which are facing a torrent of liquidations due to falling crypto prices.

Tether, which is operated by crypto exchange BitFinex, said the rumors are circulating to “generate additional profits from an already tense market”. But the company did not specify where and how these “rumours” were spread.

Tether’s comments come amid one of the worst crypto declines in recent history, with both Bitcoin and Ethereum losing a significant amount of value. USDT has also fallen slightly below $1.

Is USDT safe from a crash?

Tether said commercial paper makes up less than 25% of USDT’s support and 47% of the stablecoin’s reserves are backed by US Treasuries.

The company has gradually removed commercial debt from its portfolio as its asset class tends to be the most volatile of traditional debt instruments. Data from Tether’s website shows that 28% of its cash equivalents are commercial debt.

The company said it plans to reduce its holdings of commercial debt to $8.4 billion by the end of June, from $11 billion at the end of March. It plans to eventually bring that figure down to zero.

Tether stable after fear ending in May

A crypto crash in May caused USDT to briefly fall to $0.95, its weakest level since 2017. Control of stablecoins has increased after TerraUSD, once the fourth-largest stablecoins, fell to zero in less than a week.

But USDT is different from UST where the former is fully collateral. UST was supported by volatile assets resulting in depegging.

USDT has also been able to handle rising redemptions, with Tether claiming the stablecoin is holding up well. During the height of the May crash, Paolo Ardoino, Tether’s chief technology officer, claimed the company had processed $7 billion in redemptions in 48 hours.

USDT now trades at $0.9983, with a market cap of $70.8 billion.

With over five years of experience in global financial markets, Ambar plans to leverage this knowledge for the fast-growing world of crypto and DeFi. His main interest lies in finding out how geopolitical developments could affect crypto markets and what that could mean for your bitcoin holdings. When he’s not scouring the internet for the latest news, you can watch him play video games or watch Seinfeld reruns. You can reach him at [email protected]

The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication is not responsible for your personal financial loss.



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