The stablecoin issuer Tether was created back in 2014. Since then, the company has never disclosed a breakdown of safety stocks. However, it has now been introduced and the breakdown of reserves as of March 31 shows that Tether held almost 76% of its reserves as cash and cash equivalents. The company also has other short-term deposits and commercial papers.
How are Tether safety stocks broken down?
According to the data presented, Tether’s market capitalization was $ 42.35 billion. Most of the cash and cash equivalents are in the form of commercial paper. They account for 65%. Fiduciary deposits accounted for 24% of the category, securities from repo transactions – 3.60%, treasury bills – about 3%. At the same time, the actual funds amounted to only 3.87%.
Tether’s chief legal adviser, Stuart Högner, commented on such a small percentage of real cash relative to total reserves that focusing solely on cash in the cash and cash equivalents category is misleading. He also stressed that one shouldn’t confuse the concept of cash with a lack of liquidity.
Högner also noted that the company only invested in Bitcoin: “We saw BTC become an important component of the balance sheets of several large corporations in both the public and private markets. This serves to diversify risks. The use of Tether BTC and other forms of investment is consistent with this practice”.
Why did the company provide such full details?
It is worth noting that since 2019 the company has been updating daily information on the value of its safety stocks. This is due to the desire for maximum transparency and setting standards in the industry. Data quoted in dollars (USD), euros (EUR) and Chinese yuan (CNH). It also contains information about the measurement in gold (XAU).
Tether originally claimed that each USDT stablecoin backed by US dollars at a 1:1 ratio. In March 2019, Tether also announced that USDT fully backed by the company’s reserves. But this is the first time the company presented such full details.
This came a few months after the New York Attorney’s Office (NYAG) settled a legal dispute with Bitfinex and Tether, ordering them to pay a fine of $ 18.5 million and provide quarterly reports on their activities.
The company commented on its current actions as follows: the publication of this data shows our commitment to publicity and a confident path towards complete transparency. Such actions will set high standards in the industry for the rest of the stablecoins. The company has pledged to continue this practice for the next two years.
However, users still have questions. Only the types of financial instruments are named, but it is not specified which securities the company holds in reserves. The community would like to know how reliable they are.
Note that USDT usage has skyrocketed in recent months. In April, its market capitalization exceeded $ 50 billion, and now it is already approaching $ 58 billion.