Tether Limited Inc, the company responsible for bringing the stablecoin ecosystem USDT to life, announced on Thursday, October 13, that it had reduced its paper holdings to zero. A mixed combination of cash reserves, paper holdings and US Treasury notes have purportedly been the primary instruments which served as collateral for its USD Tether stablecoin. That is of course until now, with the news that all of its paper holdings have been eliminated.
The company announced a plan to reduce paper holdings several months ago. As early as May of this year, Tether Limited announced that it had reduced its commercial holdings for the first time in Q1, believed to largely be in response to growing questions around the specific make-up of its asset base. The official plan to liquidate its commercial paper instruments to zero ultimately, went into effect as the company began converting more of its holdings in July of this year. Until that time rumours circulated suggesting around 85% of the assets backing USDT were held in commercial paper, a metric the company still denies.
A More Stable Stablecoin
Tether has reported a commitment to ensuring its asset base, used to collateralize USDT, is as stable and transparent as possible. Transparency could certainly be deemed a vital step for USDT to ensure, with its position as the top-ranked stablecoin by market capitalization and volume at the time of writing.
Tether began swapping its commercial papers in late July after responding to criticism of what was called by some to be unclear backings. The company made recent blockchain news earlier this month when it released information that it had reduced its paper holdings to under $50 million USD, down from $8.5 billion just a few months back in July.
Commercial papers are fixed-income instruments in the financial market defined technically as an unsecured promissory note with a fixed maturity which is typically reached in under 270 days. Paper holdings are considered to be a much less stable form of an asset than other alternatives such as US Treasury Bonds and even fixed Corporate Bonds.
A Promise Fulfilled
In the cryptocurrency sector, and financial markets in general, companies often fail to deliver, or lag on promises made to customers and the public sector. In this case, Tether made good on a prior established commitment made to the organizations, government entities, and individuals who either utilize, closely watch or monitor its company practices.
This could be seen as nothing short of positive, as USDT looks to continue to provide financial and technological services as the most traded USD-pegged stablecoin on the entire cryptocurrency market according to the most recent data. USDT falls only behind Bitcoin and Ethereum in total market capitalization.