Tether Calms Fears Over Reserve Backing, Exposure to 3AC, Celsius
- Tether has denied the rumors that 85% of its commercial paper portfolio is backed by bad Chinese real estate debt.
- The firm stated that U.S. Treasuries made up 47% of its reserves and that commercial paper amounted to less than 25%.
- Tether also denied exposure to the insolvent crypto lender Celsius and potentially insolvent hedge fund, Three Arrows Capital.
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The stablecoin issuer Tether has dismissed rumors concerning the heath of its commercial paper portfolio as “completely false and likely spread to induce further panic.”
Tether Condemns False Backing Rumors
Tether is once again refuting rumors concerning its USDT stablecoin’s backing.
In a Wednesday morning blog post, the industry’s largest stablecoin issuer addressed the rumors that its “commercial paper portfolio is 85% backed by Chinese or Asian commercial papers and being traded at a 30% discount.” It said that the allegations are “completely false” and likely spread to induce further panic and generate profits.
Referring to its latest assurance opinion from March, Tether highlighted that over 47% of the reserves backing its USDT stablecoin comprised U.S. Treasuries, widely considered one of the safest financial instruments for investing. Conversely, commercial paper—a form of short-term unsecured corporate debt—allegedly made up less than 25%.
Tether CTO, Paolo Ardoino, who often acts as the firm’s primary spokesman, separately stated on Twitter that Tether had further reduced its commercial paper holdings by 50% since Mar. 31 and that by the end of June, its exposure to corporate debt would amount to only $8.4 billion. In addressing the rumors more directly, he wrote, “It’s insane how much FUD is spread by hedge funds interested [in causing] further hell to make some extra bucks.”
Concerns over Tether’s commercial paper portfolio initially emerged last December when Bloomberg ran a report claiming that a significant portion of the firm’s stablecoin reserves was backed by Chinese real estate companies’ short-term debt. At the time, financial markets were embroiled in a panic over the potential bankruptcy of Evergrande, China’s largest real estate developer. Tether denied holding any Evergrande debt and dismissed the report as “misinformation.”
In today’s blog post, the stablecoin provider also denied it had exposure to Three Arrows Capital, one of crypto’s most prominent hedge funds, now rumored to be facing insolvency. It also denied having any current exposure to the now insolvent crypto lender Celsius, apart from a small investment made out of Tether equity in the company. “Celsius position has been liquidated with no losses to Tether,” the firm wrote Wednesday, adding that its lending activities with Celsius and other borrowers have always been overcollateralized.
Despite significant market volatility in recent days, Tether’s USDT stablecoin has maintained parity with the dollar.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.