Tether Stablecoin: No Backing In Chinese Commercial Paper, They Say

✍️ 29 July, 2022 - 7:54 👤 Editor: Jakub Motyka

• Tether, the company behind USDT, claimed to have no Chinese commercial paper as part of its backing.
• According to some rumors, the company would have some short-term loans with large Chinese companies.
• The company has previously promised to reduce its Chinese paper holdings by the end of November.

Tether, the company behind the USDT stablecoin, claimed not to have commercial papers from China in the face of constant rumors flooding the internet. According to the latter, the company would have 85% of its backing in commercial paper from that country. Through his Twitter account, the issuer of the stablecoin stated that its exposure to this type of asset is currently a tenth of what it was a year ago . In addition, they reaffirmed their intention to reduce it to zero in early November.

For those who do not know, a “commercial paper” (CP) is a short-term financing instrument used to recognize a commercial credit in the name of the debtor. In other words, it is a promise of payment guaranteed by the lending company. However, with the wave of insolvency sweeping the cryptocurrency market,many fear that Tether's capital, and its users, is in jeopardy.

What Would It Mean That Tether Is Backed By Commercial Paper From China?

According to an investigation by Bloomberg, Tether had a significant part of its support in short-term loans with large Chinese corporations. As a result of the real estate recession in the Asian power, many companies have begun to have liquidity problems. This could affect the ability of some companies to make the corresponding refunds to the different commercial paper that support the USDT stablecoin.

star_borderOn this, Tether assured “to have a diversified portfolio with limits to the exposure in issuers or individual assets. Their commercial paper reduction is a commitment to their community.” He also pointed out that currently about 47% of USDT reserves are US Treasuries. Commercial paper support represents less than 25% of the total, and does not depend solely on Chinese companies.

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