MARKETREGULATION

Tether's Latest Reserve Report: Reduction in Commercial Paper Holdings, Increase in U.S. Treasury Bonds, Potential Risks Reviewed

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Tether

Tether has released its latest reserve report as of the crypto market crash, highlighting a significant reduction in commercial paper holdings and an increase in US Treasury bonds, with total reserve assets exceeding liabilities.

According to the latest reserve report from Tether as of 03/31/2022, it emphasizes that reserve assets exceed the required amount to redeem issued USDT, and the issued USDT is classified as a liability under International Financial Reporting Standard 9 (IFRS 9).

Reserve Data Summary

  • Total assets of $824 billion.
  • Liabilities of $822 billion, with $821 billion in tokens issued.
  • Commercial paper holdings reduced by 17% to $201 billion, with an average rating upgraded from A-2 to A-1.
  • U.S. Treasury bonds increased by 13% to $392 billion.

Detailed reserve data arranged by percentage is as follows:

  • 47.6% | U.S. Treasury bonds: $391 billion
  • 24.4% | Commercial paper and certificates of deposit: $200 billion
  • 8.2% | Money market funds: $67.9 billion
  • 6% | Other investments including digital currencies: $49.5 billion
  • 5% | Cash, bank deposits: $41 billion
  • 4.5% | Corporate bonds, funds, precious metals: $37.2 billion
  • 3.8% | Mortgage loans non-affiliated entities: $31.4 billion
  • 0.3% | Non-U.S. Treasury bonds: $2.86 billion
  • 0.1% | Repurchase agreements: $1.05 billion

Potential Risks

Tether emphasizes that commercial paper has further decreased by 20% since 4/1. Concerns surrounding Tether include:

1. Tether has not disclosed the origin of its non-U.S. Treasury bonds. U.S. bonds are recognized for high liquidity, while non-U.S. bonds may come with higher default rates.

2. Before a potential crypto market collapse, the community points out that assets minus liabilities leave only $162 million, indicating a 1.9% decline in the $86.9 billion of risky assets in reserves, such as corporate bonds, funds, and other investments. Tether's liabilities may exceed reserve assets.

3. Audits are conducted by third-party accounting firm MHA Cayman. Tether was audited by Moore Cayman since February 2021, and on 1/14 this year, MHA Cayman took over. However, on 1/8, the UK accounting regulator stated that it was investigating the annual audits of MHA Macintyre Hudson in 2018 and 2019, following the announcement of another accounting firm, Mazars, falling short of standards and regulations.

Related Executive Comments

Tether CTO Paolo Ardoino stated:

The past week has been a clear demonstration of Tether's resilience. Tether has remained stable through multiple black swan events and highly volatile market conditions, never refusing any verified user's redemption requests, and the latest audit further emphasizes that USDT is fully backed by reserves, robust, and with ample liquidity.

Tether co-founder Reeve Collins mentioned:

If we mess up, we lose everything, and there are not many financial institutions that can redeem over $7 billion in a few days.

He referred to last week's USDT decoupling incident, where Paolo Ardoino responded at the time, "Welcome everyone to redeem 1:1."