Tether, the world’s largest stablecoin, said Friday that it has cut its commercial paper holdings by about 58% as part of an earlier commitment to reduce exposure to riskier assets.
Often underpinned by reserves of assets such as US dollars, gold, and government debt, stablecoins are widely used in cryptocurrency trading and Tether is the primary means of transferring money between cryptocurrencies or into regular cash.
Tether’s reserves include U.S. Treasuries and commercial paper, which refers to short-term debt issued by companies.
The token has $8.4 billion (nearly 66,300 crore) of commercial paper and plans to reduce its holdings to $3.5 billion (nearly 27,700 crore) by the end of July, according to a report. statement.
The company aims to reduce its commercial paper holdings to zero, in an attempt to address concerns about the quality of the assets underpinning its token amid the crypto market meltdown.
Tether slipped below 1:1 against the dollar in May before recovering, a drop that sent shockwaves throughout the industry.
The statement also mentions that this cut is part of a larger strategy to ensure that Tether has a diversified portfolio with limits on individual issuers or assets. By taking this step, the company is fulfilling its commitment to reduce its investments in commercial paper. It also validates the business, as part of an ongoing effort to increase transparency for the stablecoin industry. This will continue to be reflected in the future assurance comments in the coming months.
© Thomson Reuters 2022