Tether, the stablecoin which was the subject of a criminal investigation by the New York Attorney General, has provided an accounting of its reserves used to back up the value of its stablecoin.

Bitfinex, the company behind Tether, had issued approximately 42 billion USDT by March 31, the period for which the company’s statement is valid. While they provide a glimpse into the holdings used to back the cryptocurrency, the pie charts released by Tether reveal little actual detail and do not answer important questions related to the holdings’ liquidity.

Approximately 76% of the stablecoin’s reserves were held in cash and cash equivalents. Commercial paper – unsecured short-term debt issued by companies – accounted for 65.3% of this category. Tether did not provide details of ratings and counterparties for its holdings. This is important because commercial paper can vary in quality and liquidity based on the issuer. Cash and treasury bills accounted for 3.87% and 2.94% of the remaining cash and cash equivalent reserves respectively.

The remaining 25% were divided between secured loans, which comprised 12.5% of the entity’s holdings and corporate bonds, funds, and precious metals, which accounted for 9.96%. Similar to other corporations that have incorporated Bitcoin into their treasury management practices, Tether has also invested 1.64% of its total reserves, or around $7 million, into the cryptocurrency. Given Bitcoin’s volatile price swings, it remains unclear how it figures in Tether’s reserve plans. Another stablecoin, MakerDAO, which uses Ethereum’s ether and a bunch of other cryptocurrencies as reserves had problems maintaining its peg last year.

“We have seen BTC become an important component of the balance sheets of several large corporations in both the public and private markets. This serves to diversify risk,” Stuart Hoegner, Bitfinex General Counsel, told The Block.   

Tether’s Troubles    

Tether is the rail to convert between different cryptocurrencies because it trades at parity with the US dollar and is supposed to be the most liquid of all coins. Bitfinex initially claimed that it held a US dollar as backup for each Tether coin in existence. But the company has refused to provide credible proof for the claim.

In March 2019, Tether amended the claim on being backed completely by the US dollar on its website. Hoegner told Coindesk that, during investigations by NYAG, the company revealed that Tether was backed by only 74% of its claimed reserves at one point. Publication of its reserves is an effort to provide transparency into its reserves.      Bitfinex, Tether’s owner, paid a fine of $18.5 million to the New York Attorney General in February to settle charges that it commingled client and corporate funds by siphoning away $700 million of Tether’s reserves to hide $850 million accounting hole in its balance sheet.