Tether Again Refutes Claims It Holds 85% Chinese or Asian Commercial Papers
For the second time in the past two months, the issuer of the world’s most used stablecoin has denied the claims that it holds Chinese commercial paper. Tether notes in a July 27 blog post that it published in its bid to tackle what it considers to be false information plaguing the cryptocurrency ecosystem that its diversified portfolio will remain limited to exposure on individual issuers or assets.
A portion of the post states: “Tether’s portfolio holds no Chinese commercial paper and as of today, its total commercial paper exposure has been reduced yet again to a mere ~3.7B (from 30B in July 2021) with plans to further decrease to ~200M by the end of August 2022 and to zero by end of October/early November 2022.”
The significance of commercial paper
The Chinese commercial paper is a debt financing tool that a non-financial corporation can issue in the inter-bank bond market with a term of 365 days for the principle and interest to be repaid. It is commonly used in the property sector to promise future payment to suppliers on a fixed date but has increasingly become a source of funding for cash-strapped developers.
The suspicion of holding Chinese paper could be traced to a 2021 Bloomberg investigation that found evidence that Tether’s reserves included short-term loans to large Chinese companies. A downturn in the Chinese property market later followed at the end of the year which raised concerns about the liquidity of assets associated with the sector.
According to the Shanghai Commercial Paper Exchange, 484 companies were reported to have defaulted on at least three commercial paper payments between Aug. 1 and Dec. 31. The 100 companies that added to the list in December included 95 in the real estate sector. No direct connection was made between the development and the stablecoin issuer and none other was made later.
Tether says aiming for 0 commercial paper exposure
Tether reported cutting its commercial paper holdings last month (June) by around 58% as part of an earlier commitment to reduce its exposure to riskier assets. Earlier, in a May assurance opinion, the leading stablecoin announced that over 47% of its total USD₮ reserves are now US Treasuries while commercial paper makes up less than 25% of its backing.
Tools: USDt/USD perps (the perfect attack vector that offers an asymmetric bet), spot short selling, DeFi pools unbalancing, …
Goal: create enough pressure, in the billions, causing ton of outflows to harm Tether liquidity and eventually buy back tokens at much lower price.
— Paolo Ardoino 🕳🥊 (@paoloardoino) June 27, 2022
The company noted mid-June that its portfolio of commercial paper had been further reduced to 11 billion from 20 billion at the end of Q1 2022 and was to be 8.4 billion by end June 2022. “This will gradually decrease to zero without any incurrences of losses,” it stated in a post in which it earlier debunked the claim of an 85% backing by Chinese or Asian commercial paper saying the false information is “likely spread to induce further panic to generate additional profits from an already stressed market.” It added that “All commercial papers are expiring and will be rolled into US Treasuries with a short maturity.”
In a Twitter thread, Tether CTO, Paolo Ardoino hinted at a “coordinated attack” attributed to some hedge funds that were trying to cause further panic on the crypto market in the wake of the TERRA/LUNA collapse. He says their goal was to “create enough pressure, in the billions, causing a ton of outflows to harm Tether liquidity and eventually buy back tokens at a much lower price.”