Investors withdraw more than 7 billion USD from Tether

According to data from CoinGecko, the circulating supply of Tether has dropped from around $83 billion a week ago to just under $76 billion on May 17. Normally, stablecoins always have a pegged value of 1 USD. However, the price of Tether May 12 fell to as low as 95 US cents amid panic over the demise of rival token TerraUSD (UST).

Most stablecoins are backed by a reserve of fiat money, with the idea being that they have enough collateral in case a user decides to withdraw. Previously, Tether claimed all their tokens were backed 1-1 by USD stored in the bank. However, after agreeing with the Minister of Justice New YorkTether revealed that it relies on a range of other assets, including commercial paper, a form of short-term, unsecured debt issued by companies, to back its token.

Tether is an important part of the crypto market, facilitating billions of dollars worth of transactions every day Screen capture

The above situation once again brought the topic of the reserve platform behind stablecoin to the attention. When Tether last disclosed its reserves, cash accounted for about $4.2 billion. The bulk of the total assets, about $34.5 billion, are comprised of unspecified Treasury bills with maturities of less than three months, while commercial paper has a value of $24.2 billion.

According to the LinkedIn profile, these “endorsements” issued by Tether each quarter are contracted by MHA Cayman, a Cayman Islands-based company with just three employees. According to CNBC, Tether has faced numerous requests to check its entire reserves. In July 2021, the company said it would release the report within “several months,” but has so far not done so.

Responding to a Twitter User Urging Tether to Release a Full Audit, Director Tether technology Paolo Ardoino insists the company’s token is “fully supported”. “We can go ahead if the market wants to, we have all the liquidity to handle the big buybacks and the one-on-one payout.” In another tweet, Mr. Ardoino said Tether is still testing. “Hopefully regulators will push for more crypto-friendly audit firms.”

The instability of tokens whose sole purpose is to maintain a stable price has worried global regulators. Last week, US Treasury Secretary Janet Yellen warned of risks to financial stability if stablecoins develop unregulated, and urged lawmakers to approve regulation for the sector by the end of the day. year 2022.

In Europe, French Central Bank Governor Francois Villeroy de Galhau said the recent crypto market turmoil should be seen as a “wake-up call” for global regulators. According to Villeroy, cryptocurrencies can disrupt the financial system if left unchecked, especially stablecoins. The European Union (EU) also plans to bring stablecoins under strict regulatory scrutiny, with a new rule known as Market Regulation in Cryptocurrency Assets (MiCA).

Tether is an important part of the market electronic money, facilitating billions of dollars worth of transactions every day. Monsur Hussain, head of financial institutions research at Fitch Ratings, said Tether would have “little difficulty” selling off its holdings. The problem, however, is that the source of those holdings is unclear. In a recent interview with Financial TimesTether’s chief technology officer declined to provide details about his treasury holdings, saying he doesn’t “want to give out our secrets”.

Anxiety around Tether seems to have fueled demand for rival tokens that are said to be “safer” than Tether such as Circle’s USDC and BUSD’s Binance. These two stocks have increased market value of about 8% and 4% respectively in the past week.