Tether Preps Against Attack By Improving Stablecoin Reserve


Tether has announced that it has taken a series of steps to improve its stablecoin (USDT) reserve, like investing in US treasury bills as well as non-US government bonds.

Tether Invests in Non-US Bonds

The Hong Kong-based company, Tether Limited, which issues the Tether stablecoin (USDT), has released an attestation report revealing that the controversial digital currency is now partially backed by “non-U.S.” government bonds. (A stablecoin is digital a currency pegged to the value of a ‘stable’ reserve asset, like the US dollar.) The move can be interpreted as a precautionary measure being taken by Tether after its peg briefly fell below the $1 mark last week. However, fearing a Terra Luna-like situation, the Tether team has doubled down on boosting its stablecoin reserves by investing around $286 million in non-U.S. government bonds. 

Is Tether Next? 

The FUD around stablecoins is understandable in the context of the Terra LUNA disaster. LUNA, the sister crypto of the algorithmic stablecoin TerraUSD (UST), went from being featured on the top 10 cryptos list to being delisted by major crypto exchanges in just a matter of days. Once the UST lost its dollar peg, the prices of both the cryptos took a nosedive and fell 99.9%. In the aftermath of the fiasco, the community is worried about which stablecoin would follow the UST to the ground. The brief fluctuation of the USDT stablecoin below its dollar peg has the community highly concerned. 

Tether Takes Action To Boost Reserve

It appears that the Tether team has learned from Terra’s mistakes and has even reduced commercial paper backings by 17%, from $24.2 billion in Q4 2021 to $20.1 billion in Q1 2022. The team has also declared that since the beginning of the second quarter of 2022, i.e., from April 2022, commercial paper backings have been reduced by a further 20%. Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. It poses certain risks of potential exposure, which has always worried regulators and economists. The reduced CP backings of the USDT stablecoin should ease some of these concerns. 

Furthermore, Tether has also reduced its bank deposits from the previous quarter’s $4.2 billion to $4.1 billion. The report also revealed that Tether’s holdings of US Treasury bills have also increased by 13% since the previous quarter to around $39.2 billion by the end of Q1 2022, representing nearly half of all Tether reserves. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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