The $1.1tn commercial paper market is vital for large companies looking to raise cash for short-term needs such as payroll and inventories. Hoegner said the commercial paper reserves included “amounts held internationally with further sub-custody at major global institutions”. He also said that Tether did not hold any commercial paper issued by cryptocurrency exchanges or affiliated entities. In a blog post a few days after its reserves report was released, Hoegner said the commercial paper that the company held was purchased through “recognised issuance programmes”, the “vast majority” highly rated, and that there were limits on individual issuers and regional exposures. Cash made up only 2.9 per cent, according to the company’s disclosure. Another 18 per cent is held in fiduciary deposits, more than 12 per cent in secured loans and nearly 10 per cent in corporate bonds, funds and precious metals. Tether said that it funnelled roughly half its reserves into commercial paper. “Tether has amply demonstrated, most recently through assurance opinions from Moore Cayman, that all issued tethers are, in fact, fully reserved,” he added. However, as Tether’s 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.īut Stuart Hoegner, Tether’s general counsel, said: “With respect to reputation, we believe we are seeing the opposite: more and more counterparties are comfortable with Tether and our transparency initiatives and are keen to work with us.” 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. JPMorgan’s analysts said the large commercial paper holdings may suggest that Tether is struggling to find a bank willing to take its cash as a deposit. “Until last week we hadn’t really heard of them,” said a trader at a large bank. “We’ve got lots of inquiries and heard lots of discussion, but have not seen any active participation,” said Deborah Cunningham at Federated Hermes. Such holdings of companies’ short-term debt would make it the seventh largest in the world.īut this reported accumulation has largely gone unnoticed on Wall Street, according to several of the biggest players in the market including bank traders, analysts and money market funds. 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. Tether operates a so-called stablecoin, which it says is backed one-for-one by dollar assets. Simply sign up to the Cryptocurrencies myFT Digest - delivered directly to your inbox.ĭisclosures from cryptocurrency provider Tether suggest it has become one of the world’s 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.
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