It goes something like this: About half of all bitcoin trades against stablecoin tether (USDT), according to data from CryptoCompare. Chinese real estate developers are some of the worlds biggest issuers of commercial paper. Many stablecoin companies have followed Tether's lead both with attestation and the use of commercial paper. The Node The biggest crypto news and ideas of the day. Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28. "The case is you have two choices, you trust the rating agencies, or you don't trust them. Approximately half of Tethers $62.8 billion assets as of the end of June 2021, were backed by commercial paper and certificates of deposit, according to the company. Questions for Cramer? Tether is completely unbacked USD that gives these exchanges the liquidity they need to market make derivatives that have non-linear . Stablecoins are rarely on the tips of investors' tongues when it comes to talking about the volatility-filled headline-grabbing crypto market. Siddharth Venkataramakrishnan and Joe Rennison. You can subscribe to get the full newsletter here. ", Regulators are starting to pay greater attention to stablecoins - digital tokens which are pegged in value to other assets, often the U.S. dollar, and backed by a pool of assets - and some observers have raised concerns about the tokens' liquidity in a time of stress. It expanded by borrowing aggressively, including during periods when Chinas economic outlook was seen in much rosier terms globally than it is now. Regulators are starting to pay greater attention to stablecoins - digital tokens which are pegged in value to other assets, often the U.S. dollar, and backed by a pool of assets - and some observers have raised concerns about the tokens' liquidity in a time of stress. We believe that this is the only way that these technologies are really created and can become mainstream.". var abkw = window.abkw || ''; In fact, $30 billion of the Tethers dollar holdings are invested in commercial paper, which makes one of the largest holders of this debt asset class and puts the firm ahead of some top financial firms. Investors aren't only looking at audits, there's also regulation. Which countries have banned TikTok, and why? The most recent report from accountant Moore Cayman shows more than 50% of the assets backing a tether coin were commercial paper and certificates of deposit, rather than dollars, or short-term government paper. The developer on Thursday applied to suspend trading of that units onshore corporate bonds following a downgrade, which market participants said indicated an increasing likelihood of defaults and restructuring. CoinDesk journalists are not allowed to purchase stock outright in DCG. "So Tether is extremely glad that there is a USDC, that there is Paxos and all the other stablecoins, because that is how we become an industry.". Crypto investors need to be alert while the Evergrande situation unfolds even if they don't personally own tether because the stablecoin is used to purchase bitcoin and ether, Cramer said. Evergrande is trying to find a way to cut costs and sell off some of its assets to dig its way out. The value of loans backing Tether's stablecoin reserves could be a risk factor for the crypto industry. A government bailout is also a possibility. Before falling into a major crisis, Chinese property developers had issued commercial paper worth 3.6 trillion yuan ($556 billion) in 202020% higher from 2019. "I think that it's a little bit aggressive, or cocky, to ask that everyone in the world use US agencies, or US auditing companies - otherwise it does not matter, or is not fine," he said. The stablecoin issuer Tether this week declared that it doesnt hold short-term debt issued by troubled Chinese real estate developer Evergrande. USDT is designed to be pegged to U.S. dollar at a 1:1 ratio, thereby making it possible to trade crypto assets without relying on traditional banking services by providing a stable unit of account. The outlet estimated that the actual figure could be even higher, since it has other units, which also issue commercial paper. However, as Tethers reserve holdings have been questioned by regulators such as the New York attorney-general in the past, providing banking services to Tether will likely raise reputational risk concerns, wrote the JPMorgan analysts. Hundreds of customers have protested in front of the companys offices alleging mistreatment or fraud. Regardless of what commercial paper you hold, bonds and commercial paper would take a hit and some issuers may even fold," tweeted Adam Cochran, partner at Cinneamhain Ventures. Sign up for Crypto for Advisors, our weekly newsletter defining crypto, digital assets and the future of finance. Tether reserves the right to change these Terms at any time without notice, and such changed Terms will take effect once we post them at the Site. The developer on Thursday applied to suspend trading of that unit's onshore corporate bonds following a downgrade, which market participants said indicated an increasing likelihood of defaults and restructuring. Get the latest business insights from Dun & Bradstreet. clarified that Tether does not hold Evergrande's commercial paper. Evergrande was successful in raising around $8 billion by August, according to a report from Bloomberg, but it is just a drop in the pan compared to what it still owes. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities. While Tether (the company) said back in September it doesn't hold Evergrande commercial paper, about a month ago Bloomberg BusinessWeek reported Tether's holdings included "billions of. Evergrande has now had to suspend trading of that units onshore corporate bonds following a downgrade, another red flag pointing towards an impending default. Or perhaps there are other ways to explain things. Data is a real-time snapshot *Data is delayed at least 15 minutes. The US Office of the Comptroller of the Currency has released guidance saying that banks can take deposits from stablecoin issuers only if the coins are fully backed by reserves. personalising content and ads, providing social media features and to Hoegner said the commercial paper reserves included amounts held internationally with further sub-custody at major global institutions. By signing up, you will receive emails about CoinDesk product updates, events and marketing and you agree to our, Bankman-Fried Should Have Only Flip Phone, Website Whitelist, DOJ Says, With Congress Impotent, Courts Are the Only Option for Fighting SEC Overreach, Silvergate Closes SEN Platform Institutions Used to Move Money to Crypto Exchanges, Binance.US Is Operating 'Unregistered Securities Exchange,' SEC Official Says. To a fair extent, staying in the same playing field as Evergrande makes Tether susceptible to the domino effect. Disclosures from cryptocurrency provider Tether suggest it has become one of the worlds largest investors in the US commercial paper market, rubbing shoulders with the likes of fund managers Vanguard and BlackRock and dwarfing the investments of tech giants like Google and Apple, according to estimates from JPMorgan. Be a smarter, safer investor in eight weeks. Today, Bloomberg BusinessWeek reported that stablecoin issuer Tether owns billions of dollars worth of commercial paper issued by large Chinese firms and that it may be using these assets to back up its stablecoin reserves. Sign up for The Node, our daily newsletter bringing you the biggest crypto news and ideas. Bitcoin, meanwhile, remained above all-time highs by about 5.5%. In May, it provided a breakdown of these reserves, which Tether claims included just under $30bn in commercial paper, a short-dated investment similar to cash. "The problem with tether is that it's backed by various holdings and roughly half of those are commercial paper short-term loans and much of that is believed to be, but we don't know, Chinese commercial paper," Cramer said. Approximately half of Tether's $62.8 billion assets as of the end of June 2021, were backed by commercial paper and certificates of deposit, according to the company. Tether, the largest stablecoin, is a Hong-Kong based stable currency. Hit him up! Among other signs of serious mismanagement, customers have made large deposits on Evergrande apartments that were never built. Tether, Bitcoin and Chinese Commercial Paper at Scale Webinars Indices Markets Finance Technology Web3 Policy Sponsored Content Upcoming event Yuga Labs, Google and More TV & Videos TV & Videos. By signing up, you will receive emails about CoinDesk products and you agree to ourterms & conditionsandprivacy policy. Analysis-Investors grappling with Evergrande fallout weigh risk of wider pain, This sprinting robot could become your next beach lifeguard, Domino effect as more EU institutions ban TikTok on work devices, TikTok is setting time-limits for teens. According to documents received byBloomberg BusinessWeek, Tether has extended billions of dollars in loans to large Chinese companies. Tether has become one of the most important components of the cryptocurrency ecosystem, with more than 35bn tethers printed so far this year, more than double its supply in January. And it could offer savvy investors the opportunity to hedge against the Tether Bomb an affectionate term for the fact that nobody really From 2018 onwards, new stablecoins have been pouring onto the markets. recently accused of violating securities laws. The developer on Thursday applied to suspend trading of that unit's onshore corporate bonds following a downgrade, which market participants said indicated an increasing likelihood of defaults and restructuring. Balancing Innovation and Regulation: Why a Risk-Based Approach to Crypto Could Benefit America, Crypto Price Predictions, March 2023: Altcoins Are About to Take a Wild Turn, Top 10 Telegram Channels for Crypto Signals in 2023, Binance Accused of Malpractices Similar to FTX, Navigating Crypto Taxes Made Easy & Cheap: Meet Cryptiony. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Understanding the magnitude of size and growth of USDT, bitcoin and Chinese commercial paper may help give some perspective to the latest headlines. "Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so," the company said. The struggling real estate giant has listed $300 billion in total liabilities and says it needs to find funds quickly. Tether reserves the right to change these Terms at any time without notice, and such changed Terms will take effect once we post them at the Site. Ardoino clarified that Tether does not hold Evergrande's commercial paper. An additional 20% reduction is to show up on the company's Q2 report. All Rights Reserved. "So if A1 commercial paper rated by a US Agency is considered safe [then] why is where the issuer located matters?". Head to consensus.coindesk.com to register and buy your pass now. Consider this - most of the reserve assets Tether holds to support its USDT are commercial papers (CPs) and certificate of deposits (CDs) instead of the US dollar. (Reporting by Alun John; Editing by Mark Potter), Ukraine Latest: Russia Continues Efforts to Encircle Bakhmut, INSIGHT-Before fatal collapse, Turkish building had skirted code thanks to Erdogan policy, In Chicago, adapting electric buses to winters challenges, Ukraine ally Kallas fights for reelection in Estonia vote, Global race to boost electric vehicle range in cold weather. Chinas loose and reactive (at best) financial regulatory environment is one reason anxiety around Tether has largely centered on whether it holds Chinese commercial paper in general not just whether it holds Evergrandes. Tether is the third-largest cryptocurrency by market value, trailing only ether and bitcoin, which are second and first, respectively. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Decentral Media, Inc. is not an investment advisor. The developer on Thursday applied to suspend trading of that unit's. The tumble appears to have been triggered by the mounting problems at embattled property giant China. and other data for a number of reasons, such as keeping FT Sites reliable and secure, So while Evergrande may not be on the books, the concern is that the commercial paper may be from other real estate firms. We use The stablecoin issuer says its goal is to reduce its commercial paper holdings to zero. A stock exchange filing added that Evergrande was added to a watch list for possible further downgrades in the future. But these are the same rating agencies that are rating the US Treasuries," Ardoino said. Stablecoins are cryptocurrencies that are pegged to fiat currency on a one-to-one basis. Perhaps, if one were to scale tether on a different Y-axis like so: Perhaps the tail wags the dog. Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28. Who to fire? Analysis: Goldman Sachs faces hard sell for its consumer assets, Ex-Goldman banker Ng deserves 15 years in prison, US prosecutors say, Reporting by Alun John The developers debt is spread across an army of banks and other financial institutions, leading some analysts to worry that its collapse would have systemic impacts comparable to the fall of Lehman Brothers, which kicked off the Great Recession 13 years ago. Tether said that it funnelled roughly half its reserves into commercial paper. More Articles Evergrande has now had to suspend trading of that unit's onshore corporate bonds following a downgrade, another red flag pointing towards an impending default. Sign up for notifications from Insider! Earlier this year, Tether and Bitfinex settled one of those battles over its reserves with the New York state Attorney General. 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