Stablecoin security measures fail to fully convince

The smartphone with the Tether logo is placed over US dollars displayed in this illustration taken May 12, 2022. REUTERS/Dado Ruvic/Illustration

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LONDON, May 19 (Reuters Breakingviews) – The crypto world’s largest stablecoin has yet to prove that it is in fact stable. Tether, a $75 billion digital asset believed to be pegged to the US dollar, came under pressure after a rival coin collapsed and holders began withdrawing their money. Although Tether’s value has rallied, a lingering concern is that only 49% of its reserves, which support the peg, were made up of highly liquid assets like cash and US Treasuries at the end of December.

The company said Thursday that cash and treasury bills had increased to 53% of assets at the end of the first quarter. Riskier commercial paper holdings declined by $4 billion between December and March, and another $4 billion since then. But Tether still has $5 billion parked in “other investments” like digital tokens, while its exposure to corporate bonds and precious metals has increased slightly. Users have on average withdrawn nearly $1 billion per day from the stablecoin since May 11. At this rate, Tether’s $43 billion in liquid assets could theoretically be depleted in just over a month. (By Liam Proud)

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Editing by Peter Thal Larsen and Oliver Taslic

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