Tether Holdings announced on Thursday that it has removed commercial papers from its reserves entirely as part of its commitment to back its tokens with completely secure reserves. The issuer of the world’s largest stablecoin USDT said the investments will be replaced by US Treasury Bills, which are more secure and liquid instruments.
The firm made the announcement through a series of tweets. Commercial papers are unsecured debt instruments issued by corporations to raise funds to fulfill short-term requirements.
Tether used to hold commercial papers worth more than $30 billion in its reserve, which it has now eliminated without taking any losses. It has also taken additional direct exposure to US Treasuries by more than $10 billion in the last quarter.
USDT is the leading dollar-pegged stablecoin and has a circulating supply of 68.426 billion. It has added 2 billion tokens to supply in the last three months.
BREAKING: Tether is proud to announce that we have completely eliminated commercial paper from our reserves. This is evidence of our commitment to back our tokens with the most secure, liquid reserves in the market. (1/3)https://t.co/zBa9jRe7so
— Tether (@Tether_to) October 13, 2022
The chorus for replacing the risky commercial papers from the reserve grew louder after the crash of Terra Luna and the failure to maintain the $1 peg of UST stablecoin. The development roiled the market, leading to the crash of the DeFi ecosystem, which is yet to recover fully.
In a blog post, Tether’s management wrote: “This announcement comes as part of Tether’s ongoing efforts to increase transparency, with investor protection at the core of the management of Tethers’ reserves. Reducing commercial papers to zero demonstrates Tether’s commitment to backing its tokens with the most secure reserves in the market.”
A run for its money
The stablecoin market is heating up with the new and current players upping their game to increase their market share, thanks to improved economics. For perspective, the reserves backing the stablecoins are yielding higher interest income in the wake of aggressive rate hikes by the Federal Reserve.
Stablecoin issuers are launching their stablecoins on multiple blockchains to increase adoption and to remain competitive in the market. In recent weeks, USDT has been added to the Polkadot chain and Near blockchain, taking the stablecoin live on 11 blockchain networks.