After the Terra Stablecoin Collapse, Investors Withdraw $7 Billion From Tether (USDT) Amid Concerns
The collapse of the Terra ecosystem last week has got investors on an alert mode. Besides, regulators have been calling for an intervention and strong investigation for all stablecoins working in the crypto space.
Soon after Terra’s collapse, investors have withdrawn over $7 billion from Tether’s USDT stablecoin since it briefly dropped from its dollar peg and raising major concerns. Over the last week, Tether’s circulating supply has dropped from $83 billion to now under $76 billion.
Investors remain worried whether if all of Tether’s USDT tokens remain backed by the U.S. Dollar or not. USDT issuer Tether has been in controversy for a long time and also linked to its involvement in the 2017 market pump.
Previously, Tether claimed that all of its USDT tokens were backed 1-to-1 by the USD stored in the bank. However, during its recent settlement with the New York attorney general, Tether claimed that it relied on a range of other assets. This includes commercial papers, a form of short-term, unsecured debt issued by companies.
Tether remains as the largest stablecoin operator currently in the entire crypto space. But the recent situation with TerraUSD collapse has brought it once again under spotlight.
As per its reserves breakdown, cash constitutes to nearly $5 billion of its assets. Besides, Tether holds $35 billion of unidentified Treasury bills with a maturity of less than three months. The remaining $25 billion of its holdings are in commercial paper.
Tether produces these “attestations” each quarter which are signed off by MHA Cayman. There’s a growing demand from crypto market enthusiasts that Tether should conduct due audits to back its claims of having sufficient reserves.
The Democratic Party representative from New Jersey - Josh Gottheimer - told CNBC: "It's crazy right now that you can actually develop a stablecoin and have it not be backed by anything. Part of the concern is that it's unclear what they're backed by. They're going to actually have to show what those resources are.”
While everyone has been calling out Tether to conduct due audits, Tether CTO Paolo Ardoino responded: “We have redeemed 7B in 48h, without the blink of an eye. How many institutions can do the same? We can keep going if the market wants, we have all the liquidity to handle big redemptions and pay all 1-to-1. Yes, Tether is fully backed”.