Crypto Tether (USDT): 2 questions you dare not ask, and their answers!

Is Tether 100% backed by dollars?

Tether acknowledged last year that it had a certain amount of cash, but had also purchased a significant volume of treasury notes, which are short-term corporate debt. Tether does not disclose which companies it owns treasury notes or where they are held, which has raised concerns.

However, the company intends to gradually reduce its commercial paper reserves. Commercial paper contributes just over 30% of Tether’s total reserves in the fourth quarter of 2021, up from over 44% in the third quarter.

@MxTale @Dude13__ @GrgoryR @monpetitplacmnt Tether is in no way guaranteed by real money 1:1 for once but also by other assets… And a regulatory hit could make them lose their peg So risk 0 no, but stablecoins are rather safe yes , especially USDC and DAI, rather than USDT

“Over time, we will continue to reduce commercial paper; we’re not done yet”Paolo Ardoino, technical director of Tether and the Bitfinex exchange, told CNBC during the summit of the Blockchain Week in Paris of April 13.

According to a report by an accounting firm, approximately $30 billion of its dollar assets are invested in commercial paper. This would put Tether on par with a bank like Charles Schwab ; and as the 7th largest holder of this type of debt.

What if Tether collapses or goes bankrupt?

After an anonymous anti-Tether blog post titled “ The Big Short: Inside Bitcoin’s Doomsday Machine » went viral, CNBC’s Jim Cramer advised viewers to sell their cryptos! ” If Tether collapses, it will destroy the entire crypto ecosystem”did he declare.

Read also Regulation of stablecoins: For or against the regulation of stablecoins? Read this for an informed choice

The quantity of inferred assets in dollars of Attached, in the eyes of regulators, is so large that even assuming all Tethers tokens are dollar-backed, it would be risky. If a large number of investors demand their money back at the same time, the company could be forced to liquidate its assets at a loss, allowing a snowball effect.

The collapse would not only concern cryptos. Credit markets could fail, leading to losses in the regulated financial system. A collapse of Tether would be more catastrophic than that of Bernard L. Madoff Investment Securities.

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