On Wednesday, Tether, the company behind the USDT stablecoin, dismissed claims that the token is backed by low-rated debt. In a press release, the firm stated that recent “rumours” that the portfolio used to fund USDT is made up of Chinese or Asian commercial papers are “completely false.”
It also denied any exposure to ailing lender Celsius and crypto hedge firm Three Arrows Capital, both of which are facing a flood of liquidations as cryptocurrency prices collapse.
Tether, which is run by cryptocurrency exchange BitFinex, stated that the claims are being spread to “generate additional profits from an already stressed market.” However, the company did not say where or how these “rumours” were spreading.
Tether’s remarks come in the midst of one of the greatest crypto downturns in recent history, with both Bitcoin and Ethereum shedding considerable value. The USDT has also slipped marginally below the R16.08 mark.
Is USDT secure against a crash?
Tether stated that commercial paper accounts for less than 25% of USDT’s backing and that US Treasuries account for 47% of the stablecoin’s holdings.
Given that commercial debt is typically the most volatile of traditional debt products, the firm has been gradually moving it out of its portfolio. According to Tether’s website, commercial debt accounts for 28% of its cash equivalents.
The company stated that it intends to reduce its commercial debt holdings to R135 billion by the end of June, down from R177 billion at the end of March. It intends to reduce that figure to zero in the future.
Tether is stable following the depegging threat in May
Following a crypto meltdown in May, USDT momentarily depreciated to as low as R15.28, its lowest level since 2017. Concerns about stablecoins have grown because TerraUSD, once the fourth-largest stablecoin, dropped to zero in less than a week.
However, USDT differs from UST in that the former is fully collateralized. Because UST was backed by volatile assets, it was depegged.
Tether claims that USDT is holding up well in the face of increased redemptions. At the height of the May crisis, Tether’s chief technical officer, Paolo Ardoino, said that the company had handled R113 billion in redemptions in 48 hours.
The USDT is now trading at R16,06, with a market capitalization of R1.1 trillion.