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Stablecoin Crucial Reserves – An Unanswered Mystery by Tether in the Crypto World

We all know that cryptocurrency, from its inception, has made headlines in the economic sectors and markets globally. The reason behind the popularity of digital currency is that many entrepreneurs and enthusiasts think that crypto will be the future world. So, the supporters of digital currency are rushing to buy it and use several platforms to reach it before it becomes more valuable.

There are various mechanisms to cope with apparent risks and fluctuations in the crypto world, such as by using stable coins. With the advent of stable coins, the digital world and markets have taken a new turn for their users and supporters.

Similarly, a stable coin named Tether has convinced the Treasure Secretary of the US named Janet Yellen to hold a meeting in July with the chairperson of Federal Reserve and Securities Commission and other top six officials to discuss it. Many news channels covered this issue named it a “$69 billion mystery”. What is even more surprising is that during the rise of inflation and Covid cases, a US Treasure Secretary got intimidated with digital currency. The whole situation was painting a picture as if Tether being a digital currency, has alarmed the financial system of the US, and Joint Chiefs of Staff were on the verge of war.

If you don’t know what stable coins are, then Tether is a good example to explain it. Stable coins are meant to give investors a safe side by offering them stability while trading and exchanging in cryptocurrency. Stable coins work as an incitement to popularize digital currency in established economic markets. The main aim of a stable coin is to smooth out the transactions by reducing the gap between fiat and cryptocurrency by applying different mechanisms. Tether also works as a stablecoin because it has worth one dollar, and people can have Tethers in return.

Tether Holding Lt. issues this digital currency when people give dollars in return for having Tethers to trade in cryptocurrency. The company Tether Holdings Lt. carries people’s dollars to return Tethers whenever they want and can have their dollars back. This procedure became in demand as many banks don’t work with cryptocurrency companies due to their volatile nature.

Recently, Tether disclosed its assets and money market funds, but they did not illuminate where these funds and reserves are located. On 30th September, through the report of Moore Cayman, the world came to know that Tether holds approximately $69 billion. It comprises $19 in Treasury bills, $1 billion in money market funds, $30.6 billion in commercial paper, and more than $7 billion in cash.

This disclosure opened up many facts to the crypto world, such as Tether has some major modifications of about $1 billion in the holdings of “reverse repo notes” to market funds. In commercial papers and certificates of deposits, Tether had reduced the fraction of total assets held in this sector.

The mystery in stable coin’s crucial reserves is still there as Tether didn’t disclose and name the countries where the funds are based. A proclaimed researcher Bennet Tomlin who is connected to crypto exchange Bitfinex and has always been a major critique of Tether has pointed out that this disclosure is very interchangeable with the many past pieces of evidence.

Bennet Tomlin is of the view that the commercial paper of Tether holds a huge percentage of total assets, but it has not made it evident. Furthermore, he raised other questions like what kind of digital assets. Tether is holding, and how they use yields earned from its holdings.

Many researchers and critiques of Tethers have pointed out some related theories. The speculations are that Tether is not backed with $1, as they claim. The rumors are that Tether, while trading in the digital market, does not make one-to-one interactions with users by using dollars as they claim. Many economic charts showed that Tether is not exactly backed by 1 USD; it fluctuates around 1 USD. So to eradicate these speculations, the company, at the start of 2021, gave their consent to submit their report to New York for their settlement. The accusations also included that Tether Holdings Lt. has hidden the actual losses of funds and made the wrong claims regarding their reserves in previous years.

The disclosure made by Tether that it has commercial paper not only activated the crypto world who are the actual stakeholders but also the fixed economic world. The chairman of the Senate Banking Committee, Sherrod Brown, who is also a democratic senator of Ohio, has queried many stable coins issuers, including Tether, regarding their information on this issue. This issue got highlighted because many stable coin issuers hide their losses and make false claims regarding their reserves which has direct consequences in the economic market.

The latest declaration made by Tether Holdings Ltd. enlisted $3.6 billion in corporate bonds, $3.9 billion in investments, and $3.5 billion in secured loans. The investments of $3.9 billion also included investments done in digital tokens.

Tether has always been part of speculations as there were other rumors that this digital coin is indebted to Evergrande, China’s property developers giant incorporated by many foreign companies. When asked by Tether’s lawyer Stuart Hoegner during the interview with Bloomberg Businessweek, he refused to say that Tether is involved with other Chinese commercial papers. Also, Tether has denied the speculations about the debt to Evergrande.

The speculations regarding Tether and its reserves are still a mystery and curiosity for researchers. Despite Tether Holding’s consistent assurance regarding their percentage of digital assets, investments, and one-to-one exchange rates, Tether’s critiques are still of the same view. Perhaps, nobody including researchers, economists, and critiques is sure whether Tether is a scam or not. Still, one thing is sure is the rise of driven interest of superpowers like the US in the crypto coins.

So, in a crypto world where anything can be worth a million dollars due to its unpredictable nature, one should be careful before investing or involving themselves in digital currency by conducting authentic research.

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