In the previous two weeks, crypto traders withdrew almost $10 billion from Tether USDT, as speculation of heightened regulatory scrutiny for stablecoins has grown.
The circulating supply of USDT fell to $73.3 billion on Monday from $84.2 billion on May 11.
On-chain data suggests that traders withdrew $1 billion from Tether on May 20 alone. Terra cryptocurrency UST and LUNA crash fuelled the enormous outflow.
Following the crash of UST, USDT, along with numerous stablecoins, momentarily lost their peg. This drew a lot of attention to this crypto class and how “stable” it was.
Tether stated in a recent blog post that its de-pegging across crypto exchanges does not imply that USDT has violated its peg; rather, the de-peg demonstrates that.
Tether’s USDT 1:1 claim
Tether had claimed that USDT has a one-to-one dollar backing in a bank account, but later changed its tune to suggest that it uses other assets as collateral, such as commercial paper and even digital tokens. It announced this when it reached an agreement with New York authorities.
As part of the agreement, the company must declare its reserves every quarter. According to the most recent attestation report, it has cut its commercial paper holdings while increasing its holdings of US Treasury bills. In addition, the corporation stated that it currently holds foreign government debt.
Although the majority of the assets in the report are stable, around 11% of its investment is in “business bonds, funds, and precious metals,” as well as “other investments (including digital tokens).”
Overall, the report reveals that its reserve exceeds the amount needed to redeem the issued digital tokens.
However, according to Patrick McKenzie, a fintech pundit, Tether’s account shows that company has $162 million more in reserves than its coins. However, due to the bearish character of the crypto market, several of its investments, including those in the Celsius network, are performing poorly.
Paolo Ardoino, Tether’s chief technical officer, stated in a statement,
“Tether has maintained its stability through multiple black swan events and highly volatile market conditions and, even in its darkest days, Tether has never once failed to honour a redemption request from any of its verified customers.”