Tether Cuts Down On Commercial Paper, Reveals No Chinese Links

Tether Cuts Down On Commercial Paper, Reveals No Chinese Links

The world’s leading stablecoin issuer, Tether, has for the first time debunked claims that it is still using Chinese commercial paper. For a long time, according to the stablecoin issuer, Tether has cut down on its commercial paper exposure from $30 billion at the start of the month to $3.7 billion.

Tether’s Commercial Paper Reserve

Since the collapse of the Terra UST stablecoins, other stablecoins are at the receiving end of scrutiny regarding their long-term suitability. As a result, Tether finds itself trying to debunk rumors that its reserves are heavily dependent on Chinese commercial paper.

However, Tether has not publicly denied that it has no commercial paper reserves. But the burning question that critics use in attacking Tether is its 50% commercial paper reserve. Critics point out that at 50%, there is significant exposure to Chinese commercial paper.

Last year, the platform revealed significant exposure to international papers, which was necessary then.

As time passes, there have been rumors of an existing relationship between Tether and some Asian companies, which involves billions of dollars worth of unspecified loans.

Last month, Tether debunked rumors that a large chunk of its commercial paper comes from Chinese firms. It, however, failed to reveal more details about its dealings with the Asian companies. It has repeatedly reiterated that it is working on reducing the commercial paper holdings backing its reserves.

Meanwhile, the latest development is the first public statement the stablecoin issuer has made regarding its exposure to Chinese commercial paper. As a result, it has clarified the claims that it has an 85% commercial paper portfolio.

A Collateral Comparison Between Tether (USDT) and USD Coin (USDC)

Stablecoins are designed to stabilize digital currencies and differ from other crypto assets. However, the fear, uncertainty, and doubt (FUD) between the two widely used stablecoins has pitted them against one another.

Over a year ago, Tether was the undisputed leader between the two. However, USD Coin is beginning to flip the market in its favor. It is now the fastest-growing altcoin in the market.

The stablecoin, launched in 2018 by Circle, like Tether, is pegged to the US dollar and currently has a $1 fixed price.

For USDT, the stability of the token is normally tied to the stable value of $1, with occasional fluctuations in price. The value usually corrects itself by returning to its original price.

Furthermore, USDC has a current supply of 34.6 billion USDC and an equal supply of USD as a reserve. Like its counterpart, the stability of the USDC stands at $1 with occasional fluctuations. After that, the value of the token returns to its fixed price.

Meanwhile, USDT is widely used for transactions and trading, but it is nowhere near the transparency and safety of the USDC. The USD Coin is more regulated and has a massive reserve than the USDT. The FUD is low on the USDC stablecoin and high on the USDT.

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Ifeanyi Egede

Ifeanyi Egede is an experienced and versatile writer and researcher. He has keen interest in blockchain technology, cryptocurrencies, NFTs, Web3, metaverse, fintech and emerging technologies. He has tons of published works both online and in the print media. He has close to a decade of writing experience. When he is not writing, he spends time with his lovely wife and kids.