Tether, the operator of the USDT stablecoin, on Wednesday derided speculation that the token is backed by low-rated debt.
The firm said in a press release that recent “rumors” that the portfolio used to back USDT consists of Chinese or Asian commercial papers are “completely false.”
It also denied any exposure to beleaguered lender Celsius, and crypto hedge fund Three Arrows Capital– both of which face a deluge of liquidations due to falling crypto prices.
Tether, which is operated by crypto exchange BitFinex, said that the rumors are being circulated to “generate additional profits from an already stressed market.” But the firm did not specify the where and how these “rumors” were being circulated.
Tether’s comments come amid one of the worst crypto downturns seen in recent history, with both Bitcoin and Ethereum losing a significant amount of value. USDT has also fallen slightly below $1.
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Tether said that commercial paper makes up less than 25% of USDT’s backing, and that 47% of the stablecoin’s reserves are backed by U.S. Treasuries.
The firm has been gradually phasing out commercial debt from its portfolio, given that the asset class is usually the most volatile among traditional debt instruments. Data from Tether’s website shows that 28% of its cash equivalents is made of commercial debt.
The firm said it plans to reduce its commercial debt holdings to $8.4 billion by the end of June, from $11 billion at the end of March. It plans to eventually bring that figure to zero.
Tether steady after depegging scare in May
A crypto crash in May had seen USDT briefly depeg to as low as $0.95- its weakest level since 2017. Scrutiny towards stablecoins has increased after TerraUSD- once the fourth-largest stablecoin- slumped to zero in less than a week.
But USDT differs from UST, wherein the former is fully collateralized. UST was backed by volatile assets, which resulted in its depegging.
USDT has also been able to handle rising redemptions, with Tether claiming the stablecoin is holding up well. During the height of the May crash, Paolo Ardoino, chief technology officer of Tether, claimed the firm had processed $7 billion redemptions in 48 hours.
USDT is now trading at $0.9983, with a market capital of $70.8 billion.
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