Tether, the world's largest stablecoin, said on Friday it had cut its commercial paper holdings by around 58 percent as part of an earlier commitment to reduce its exposure to riskier assets.
Stablecoins — a variety of cryptocurrencies designed to keep a steady value — are in sharp focus after the collapse of the TerraUSD token in May.
Usually underpinned by reserves of assets such as the US dollar, gold and government debt, stablecoins are widely used in cryptocurrency trading and Tether is the predominant medium for moving funds between crypto or into regular cash.
Tether's reserves consist of US Treasury bonds and commercial paper, which refers to short-term debt issued by companies.
The token has $8.4 billion (nearly Rs. 66,300 crore) of commercial paper and plans to reduce its holdings to $3.5 billion (nearly Rs. 27,700 crore) by the end of July, according to a statement.
The company aims to reduce its commercial paper holdings to zero, in a bid to address concerns about the quality of assets underpinning its token amid the crypto market meltdown.
Tether had slid below its 1:1 peg to the dollar in May before recovering, a fall that had sent shockwaves across the sector.
The statement also mentioned that this cut is a part of a larger strategy to ensure that Tether has a diversified portfolio with limits to exposure on individual issuers or assets. By taking the step, the company is fulfilling its commitment to reduce its commercial paper investments. It also validates the business, as part of its ongoing push towards an increased transparency for the stablecoin industry. This will continue to be reflected in future assurance opinions in the coming months.
© Thomson Reuters 2022
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