In the last two weeks, crypto traders withdrew approximately $10 billion(R158B) from Tether USDT, as talk of increased regulatory scrutiny for stablecoins has grown.
According to CryptoSlate data, the circulating supply of USDT fell to $73.3 billion(R1.2TN) on Monday from $84.2 billion(R1.3TN) on May 11.
On-chain data shows that traders withdrew $1 billion(R15.8B) from Tether on May 20 alone. Terra blockchain UST and LUNA collapse fueled the massive withdrawal.
Following the crash of UST, USDT, along with several stablecoins, temporarily lost their peg. This drew a lot of attention to this crypto class and how “stable” it was.
Tether stated in a recent blog post that its de-pegging across crypto exchanges does not imply that USDT has broken its peg; rather, the de-peg demonstrates that
“There is more demand for liquidity than exists on that exchange’s order books.”
USDT 1:1 claim by Tether
Tether previously claimed that USDT has a one-to-one dollar backing in a bank account, but later changed its tune to say that it uses other assets as collateral, such as commercial paper and even digital tokens. It revealed this when it reached an agreement with New York authorities.
As part of the agreement, the company must publish its reserves every quarter. According to the most recent attestation report, it has reduced its commercial paper holdings while increasing its holdings of US Treasury bills. In addition, the company stated that it now holds foreign government debt.
Although the majority of the assets in the report are stable, approximately 11% of its investment is in “corporate bonds, funds, and precious metals,” as well as “other investments (including digital tokens).”
Overall, the report indicates that its reserve exceeds the amount needed to redeem the issued digital tokens.
However, according to Patrick McKenzie, a fintech commentator, Tether’s account shows that it has $162 million(R2.6B) more in reserves than its tokens. However, due to the bearish nature of the crypto market, some of its investments, including those in the Celsius network, are performing poorly.
Paolo Ardoino, Tether’s chief technology officer, stated in a statement,
“Tether has maintained its stability through multiple black swan events and highly volatile market conditions and, even in its darkest days, Tether has never once failed to honour a redemption request from any of its verified customers.”