CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. Get this delivered to your inbox, and more info about our products and services. It is also alleged that Tether also owns commercial paper issued by Evergrande, China's second-largest real estate developer, which is itself experiencing a major liquidity crisis. Evergrande, which has total liabilities of more than $300 billion, is also in the spotlight as it scrambles to raise funds, teetering between a messy meltdown with far-reaching impacts, a managed collapse or a government bailout. For Ardoino and the team, this highlights the crypto community's faith in Tether. Chinas loose and reactive (at best) financial regulatory environment is one reason anxiety around Tether has largely centered on whether it holds Chinese commercial paper in general not just whether it holds Evergrandes. different direction, choosing to only use cash reserves and cash equivalents, US Treasury is expected to release an in-depth report on stablecoins. The developer on Thursday applied to suspend trading of that unit's. According to a spokesperson from Tether, Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so. How Ethereum's evolution impacts crypto markets. personalising content and ads, providing social media features and to Evergrande, which has total liabilities of more than $300 billion, is also in the spotlight as it scrambles to raise funds, teetering between a messy meltdown with far-reaching impacts, a managed collapse or a government bailout. CoinDesk journalists are not allowed to purchase stock outright in DCG. In a series of tweets about the Evergrande news, partner at Cinnemhian Ventures Adam Cochran, said that IF either Tether or USDC did meltdown in a global collapse though, itd actually be bullish for crypto, as if you couldnt use them to cash out, people would just start bulk converting them into BTC/ETH regardless of price., Cochran added that, despite not being a well-known name in the West, the failure of Evergrande could have massive fallout. The company has more than $300 billion in total liabilities and recently warned investors it may default on its debts. Commercial paper typically has low default rates. Join our Telegram Group and get trading signals, a free trading course and daily communication with crypto fans! var abkw = window.abkw || ''; And it could offer savvy investors the opportunity to hedge against the Tether Bomb an affectionate term for the fact that nobody really From 2018 onwards, new stablecoins have been pouring onto the markets. Something weird happened today in crypto-world. This is not the first time concerns about the true value of USDT have emerged. Such holdings of companies short-term debt would make it the seventh largest in the world. So while Evergrande may not be on the books, the concern is that the commercial paper may be from other real estate firms. The developers debt is spread across an army of banks and other financial institutions, leading some analysts to worry that its collapse would have systemic impacts comparable to the fall of Lehman Brothers, which kicked off the Great Recession 13 years ago. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. Tethers claims that its virtual currency was fully backed by US dollars at all times was a lie, said attorney-general Letitia James in February. He said that the New York attorney-general had no clear findings that customers at any point were at risk of being unable to redeem tethers because of a lack of backing. Stablecoin Tether clarified that while they do hold commercial paper, none of it is from Evergrande. See here for a complete list of exchanges and delays. The developer on Thursday applied to suspend trading of that units onshore corporate bonds following a downgrade, which market participants said indicated an increasing likelihood of defaults and restructuring. Thus, it has grown 19-fold in a matter of two dozen months. Head to consensus.coindesk.com to register and buy your pass now. In fact, Tether claimed earlier in the year that 50% of its reserves come from commercial paper. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. Additionally, it is China's largest issuer of commercial paper with more than $300 billion in debt, according to reports. A Bloomberg report has claimed to have found that Tether holds billions of dollars worth of Chinese commercial paper. Siddharth Venkataramakrishnan and Joe Rennison. Perhaps, if one were to scale tether on a different Y-axis like so: Perhaps the tail wags the dog. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. Tether has vehemently dismissed the claims and has stated it maintains the full value of the reserves backing its stablecoin supply. Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so, the company said. Tether has been beset by transparency concerns in the past as well. Smart navigation app uses 3D sound to guide blind people. Markets cant function without transparent information flows, full stop. var absrc = 'https://servedbyadbutler.com/adserve/;ID=177750;size=0x0;setID=588602;type=js;sw='+screen.width+';sh='+screen.height+';spr='+window.devicePixelRatio+';kw='+abkw+';pid='+pid588602+';place='+(plc588602++)+';rnd='+rnd+';click=CLICK_MACRO_PLACEHOLDER'; analyse how our Sites are used. Tether had stated since its launch in 2014 that its tokens were fully backed by US dollars in bank accounts, before pivoting in February 2019 to say that its reserves included traditional currency, cash equivalents and other assets and receivables. This type of debt financing is back in the limelight as China's second largest property developer Evergrande teeters on the brink of default. The developer on Thursday applied to suspend trading of that unit's onshore corporate bonds following a downgrade, which market participants said indicated an increasing likelihood of defaults and restructuring. By signing up, you will receive emails about CoinDesk product updates, events and marketing and you agree to our, Bankman-Fried Should Have Only Flip Phone, Website Whitelist, DOJ Says, With Congress Impotent, Courts Are the Only Option for Fighting SEC Overreach, Silvergate Closes SEN Platform Institutions Used to Move Money to Crypto Exchanges, Binance.US Is Operating 'Unregistered Securities Exchange,' SEC Official Says. "It's impossible to reach these levels of success in such a short time without genuine organic interest and really wide demand from the broader crypto trading industry," Paolo Ardoino, Tether's chief technology officer, told Insider in a recent interview. var pid588602 = window.pid588602 || rnd; Editing by Mark Potter, How China's new No.2 hastened the end of Xi's zero-COVID policy, Silvergate suspends crypto payments network; shares fall after-hours, Bank of Canada to hold rates steady at 4.50% through this year, Analysis: Sharp drop in equity premium may mark return of 60/40 portfolio, As space junk threat grows, government and investors seek solutions, Brazil's Petrobras faces legal risks after halting asset sales -lawyers, Nissan and Mexican workers agree to 9% raise at Morelos plant, union says, EIA blames crude oil blending, under-reported output for high adjustments in US data, American Airlines, flight attendants union seek mediation in contract negotiations, Exclusive news, data and analytics for financial market professionals. JPMorgans 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. But is it bad? It is now the third-largest cryptocurrency by market capitalisation, according to CoinMarketCap, making up the bulk of stablecoin volume. Evergrande is just the latest major Chinese firm to have serious problems due to apparent fraud or mismanagement. They are, in theory, backed by reserves, such as short-term government bonds and the currency itself. Evergrande is a major property developer in China, and beyond real estate, it has multiple other business units operating in industries such as health-care services and electric vehicles. Can it be liquidated to meet redemptions? CNBC's Jim Cramer urged investors who have gains in their cryptocurrency portfolios to take some profits, saying Monday he believes digital currencies are likely to face more weakness related to struggling Chinese property developer Evergrande. Probing the intersection of crypto and government. 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. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. What does one have to do with the other? The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Tether is the third-largest cryptocurrency by market value, trailing only ether and bitcoin, which are second and first, respectively. A stock exchange filing added that Evergrande was added to a watch list for possible further downgrades in the future. Tether reserves the right to change these Terms at any time without notice, and such changed Terms will take effect once we post them at the Site. Tether is completely unbacked USD that gives these exchanges the liquidity they need to market make derivatives that have non-linear . Which countries in the EU are buying the most electric cars? According to the attorney-generals investigation, there were instances when Tether was not fully backed in the past. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. Crypto markets took a dip Thursday just around the time it was reported that Chinas Evergrande Group was on the verge of defaulting on a bond payment. He also said that Tether did not hold any commercial paper issued by cryptocurrency exchanges or affiliated entities. Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities. The struggling real estate giant has listed $300 billion in total liabilities and says it needs to find funds quickly. Weve got lots of inquiries and heard lots of discussion, but have not seen any active participation, said Deborah Cunningham at Federated Hermes.Until last week we hadnt really heard of them, said a trader at a large bank. Be a smarter, safer investor in eight weeks. It was news to us.. The company is currently under investigation by multiple law enforcement agencies, including the U.S. Department of Justice and the Federal Bureau of Investigation. But these are the same rating agencies that are rating the US Treasuries," Ardoino said. "Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so," the company said. The systematic suppression that characterizes Chinese markets adds an opaque but potentially huge risk for the holders of any Chinese asset even if that risk is wrapped up in a supposed stablecoin. It expanded by borrowing aggressively, including during periods when Chinas economic outlook was seen in much rosier terms globally than it is now. Tether still expects to be the first to secure an external financial statement audit, which it has been exploring since 2017, but it won't necessarily be from one of the Big Four accountants. Ardoino joined Tether back in late 2015 as a developer before being appointed chief technology officer around a year later. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Tether said that it funnelled roughly half its reserves into commercial paper. The "Mad Money" host said the struggles of Chinese developer Evergrande are likely to keep weighing on crypto markets. Evergrande is a major property developer in China, and beyond real estate, it has multiple other business units operating in industries such as health-care services and electric vehicles. But 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. First Mover The latest moves in crypto markets, in context. That type of heavy-handed control is at the core of Chinas conundrum as an authoritarian state trying to reap the rewards of capitalism. Tether has amply demonstrated, most recently through assurance opinions from [auditor] Moore Cayman, that all issued tethers are, in fact, fully reserved, he added. Its been going on for a long time one analyst who warned about Evergrandes practices as early as 2012 was temporarily banned from Hong Kong markets by regulators for his reckless claims. The downgrade notice was sent to Evergrande on Sept. 15 from China Chengxin International. In the NYAG investigation, the company was found to be conducting illegal activities in New York. The stablecoin issuer says its goal is to reduce its commercial paper holdings to zero. The latest moves in crypto markets, in context. News and analysis for the professional investor. recently accused of violating securities laws. "But tons of Chinese businesses stand to get crushed by this fiasco, and they have Evergrande exposure, and that could spell real trouble if the dominoes fall here.". The transformation of value in the digital age. "The vast majority of the commercial paper held by Tether is in A-2 and above rated issuers. 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. Approximately half of Tether's $62.8 billion assets as of the end of June 2021, were backed by commercial paper and certificates of deposit, according to the company. Crypto investors need to be alert while the Evergrande situation unfolds even if they don't personally own tether because the stablecoin is used to purchase bitcoin and ether, Cramer said. Tethers previous public attestations include various short-term deposits and commercial paper kept as reserves to back the USDT stablecoin. But the relatively staid coins are making up a growing proportion of the overall market, with a value of around $127 billion. At the same time, hot topics such as regulation, competition and the Evergrande debt crisis are shining a spotlight on that "old information". By signing up, you will receive emails about CoinDesk products and you agree to ourterms & conditionsandprivacy policy. "Tether has maintained its stability . The developer on Thursday applied to suspend trading of that unit's onshore corporate bonds following a downgrade, which market participants said indicated an increasing likelihood of defaults and restructuring. The latest moves in crypto markets, in context. He also shares his expectations on stablecoin regulation and competition. Balancing Innovation and Regulation: Why a Risk-Based Approach to Crypto Could Benefit America, Crypto Price Predictions, March 2023: Altcoins Are About to Take a Wild Turn, Top 10 Telegram Channels for Crypto Signals in 2023, Binance Accused of Malpractices Similar to FTX, Navigating Crypto Taxes Made Easy & Cheap: Meet Cryptiony. Sign up for The Node, our daily newsletter bringing you the biggest crypto news and ideas. After a couple of decades of relative freedom for entrepreneurs (including, as mentioned, the apparent freedom to commit securities fraud), Chinese leadership under Xi Jinping has begun to aggressively intervene in markets. Lab leak theory: 3 years on, will we ever know where COVID came from? David Z. Morris is CoinDesk's Chief Insights Columnist. Earlier this year, Tether and Bitfinex settled one of those battles over its reserves with the New York state Attorney General. "The vast majority of the commercial paper held by Tether is . Elon Musks Twitter is dying a slow and tedious death. Ardoino wouldn't comment on whether the Treasury directly spoke to Tether for the report. In those two years, bitcoins market cap has gone up eight times, from $159 billion to $1.3 trillion. A government bailout is also a possibility. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Tether's USDT remains the dominant stablecoin in the market despite the FUD surrounding the coin. Who to fire? Krypto. Evergrande, for its part, is the largest commercial paper issuer in China's real estate market, owning some $32 billion worth of commercial paper at the end of last year. Debate swirls about whether that impact would spread beyond China, but theres broad agreement that impact within the country would be near catastrophic. Chinese real estate developers are some of the worlds biggest issuers of commercial paper. By signing up, you will receive emails about CoinDesk products and you agree to ourterms & conditionsandprivacy policy. At the end of 2020, it had $32 billion worth of commercial paper. A wave of smaller stock frauds from 2010-2016 were chronicled in the documentary The China Hustle, and Luckin Coffee put an exclamation point on the trend in 2019. Your weekly wrap of Web3 news and trends. In early 2021, Tether paid a fine of $18.5 million to settle a case with the New York Attorney General. A growing swarm of debris in space has led the U.S. government to attempt to set new space hygiene norms, while private companies are also investing in ways to tackle the messy orbital environment. Lawrence Lewitinn is CoinDesk's managing editor of global capital markets. A commercial paper report from Evergrande at the end of 2021 showed its main unit had $32 billion, just around 10% of its total liabilities. Bitcoin and other cryptocurrencies were crashing Monday amid a global selloff in risk assets. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information. Tether has become one of the most important components of the cryptocurrency ecosystem, with more than 35bn tethers printed so far this year, more than double its supply in January. In addition to being a major real estate developer, Evergrande is also China's largest issuer of commercial paper (very short-term corporate bonds). Chinese real estate developers are some of the world's biggest issuers of commercial paper. Hundreds of customers have protested in front of the companys offices alleging mistreatment or fraud. To counteract that line of questioning, Tether secured attestations on its financial statements - a review from an independent accountant, rather than a full audit - on the reserves. Just last month, Bitfinex, Tethers parent company, tried to block CoinDesk from accessing the specifics of its commercial paper holdings by filing a petition in New York Supreme Court. The New York attorney-generals office declined to comment on whether Tethers disclosure, which came in the form of a single-page PDF, was sufficient to meet its requirement on reporting as part of Februarys settlement. Data is a real-time snapshot *Data is delayed at least 15 minutes. What financial advisors need to know about crypto. Hit him up! Approximately half of Tether's $62.8 billion assets as of the end of June 2021, were backed by commercial paper and certificates of deposit, according to the company. We believe that our disclosures thus far prove that all tethers are fully backed with very useful disclosures about the nature of that backing, he added. Many stablecoin companies have followed Tether's lead both with attestation and the use of commercial paper. Another 18 per cent is held in fiduciary deposits, more than 12 per cent in secured loans and nearly 10 per cent. Tether grants you a limited license to access and make personal use of the Site. But he did lay out his timeline expectations for regulation. Your Use of the Site. You will receive a link to create a new password via email. Stablecoins are rarely on the tips of investors' tongues when it comes to talking about the volatility-filled headline-grabbing crypto market. But the firm has not clarified the exact details of its debtors. Analysis: Goldman Sachs faces hard sell for its consumer assets, Ex-Goldman banker Ng deserves 15 years in prison, US prosecutors say, Reporting by Alun John It goes something like this: About half of all bitcoin trades against stablecoin tether (USDT), according to data from CryptoCompare. 2023 CNBC LLC. Evergrande has now had to suspend trading of that units onshore corporate bonds following a downgrade, another red flag pointing towards an impending default. However, as Tethers 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. Evergrande has now had to suspend trading of that units onshore corporate bonds following a downgrade, another red flag pointing towards an impending default. Polygon (MATIC) Price Dropped 9% in One Day so Wheres It Headed Next? Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram, Questions, comments, suggestions for the "Mad Money" website? The outlet estimated that the actual figure could be even higher, since it has other units, which also issue commercial paper. Tether operates a so-called stablecoin, which it says is backed one-for-one by dollar assets. The report revealed that the stablecoin company also provided a billion-dollar loan to Celsius, a centralized crypto lending platform that was recently accused of violating securities laws by the U.S. States of Alabama, Texas, and New Jersey. Sign up for notifications from Insider! That should refute anyone who could try to argue USDT may have fueled Chinas boom in commercial paper. The $1.1tn commercial paper market is vital for large companies looking to raise cash for short-term needs such as payroll and inventories. "Don't let it become a loss. Tether, the world's largest 'stablecoin', said in a statement it does not hold any commercial paper or securities issued by embattled developer China Evergrande Group, as regulatory scrutiny into risks from this type of token grow. Cramer stressed he still sees potential for cryptocurrencies to go "mainstream," but believes it's important to lock in at least some gains while they're still there. Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. This was later repaid by Bitfinex. Tether is a typical design firm that will value the client's needs over their employees. The developer on Thursday applied to suspend trading of that unit's. Bitcoin, meanwhile, remained above all-time highs by about 5.5%. The transformation of value in the digital age. See here for a complete list of exchanges and delays. Overall, the studio has a watchful eye. The biggest crypto news and ideas of the day. Crypto Long &. Cramer said his crypto concerns right now begin with tether, a stablecoin that's pegged to the U.S. dollar. "Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so," the company said. Among other signs of serious mismanagement, customers have made large deposits on Evergrande apartments that were never built. Evergrande, which has total liabilities of more than $300 billion, is also in the spotlight as it scrambles to raise funds, teetering between a messy meltdown with far-reaching impacts, a managed collapse or a government bailout. 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. The industry leader for online information for tax, accounting and finance professionals. Evergrande was successful in raising around $8 billion by August, according to a report from Bloomberg, but it is just a drop in the pan compared to what it still owes. Money Reimagined The transformation of value in the digital age. Before falling into a major crisis, Chinese property developers had issued commercial paper worth 3.6 trillion yuan ($556 billion) in 202020% higher from 2019. According to Bloomberg BW, stablecoin issuer Tether has extended billions of dollars in loans to Chinese companies. Or perhaps there are other ways to explain things. We are completely confident.". All evidence points to tether's CP as a formal accounting trick to say "we just give a bunch of Tether to FTX, Binance, and Cumberland as stand in for USD to provide liquidity". In total, Tether holds 52% US Treasury bonds, 37% commercial paper, with the remainder in cash and money market funds. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. But this is not just about one company: Even if Tether doesnt specifically hold any of Evergrandes short-term debt, it could have huge exposure in the form of other Chinese obligations. Cramer has a position in ether, which runs on the Ethereum blockchain. And despite it seeming as though the stablecoins are in competition, Ardoino believes this will be key to success with regulators. "The case is you have two choices, you trust the rating agencies, or you don't trust them. He takes the lead in the majority of the company's communications, while the CEO and CFO stay firmly in the background. Tether published its first Reserves Breakdown in March 2021. Meanwhile, based on data from the Peoples Bank of China, Chinese commercial paper ended Q2 in 2021 at around $900 billion, up from just shy of $700 billion that same quarter in 2019, a gain of less than a third. Evergrande is trying to find a way to cut costs and sell off some of its assets to dig its way out. Tether, the largest stablecoin, is a Hong-Kong based stable currency. Yet, does Tether truly own a lot of Chinese commercial paper? Now onto the crypto context, if you have not guess it already, Tether's USDT that tracks the value of the US dollar is backed by a significant amount of Chinese commercial paper. Sign up for free newsletters and get more CNBC delivered to your inbox. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. In fact, Tether, has been accused multiple times that their stablecoin is not backed by dollar reserves in the full amount of its market cap of $69 billion. This stability means they offer an accessible - if boring - entry and exit point to the crypto world. The developer on Thursday applied to suspend trading of that unit's onshore corporate bonds following a downgrade, which market participants said indicated an increasing likelihood of defaults and restructuring. var plc588602 = window.plc588602 || 0; The company also denied holding any Evergrande debt and claims to hold only commercial paper issued by A-2 and above-rated companies, which it claims to be risk-free. Find company research, competitor information, contact details & financial data for Tether, Inc. of Seattle, WA. Neither Tether nor Bitfinex admitted wrongdoing. HONG KONG (Reuters) - Tether, the world's largest 'stablecoin', said in a statement it does not hold any commercial paper or securities issued by embattled developer China Evergrande Group, as regulatory scrutiny into risks from this type of token grow. You can subscribe to get the full newsletter here. While the embattled housing giant ultimately made its scheduled payment of $148 million, questions persist about the long-term prospects for it and other real estate developers in China. A week after its stablecoin briefly lost its 1:1 peg with the U.S. Dollar, Tether's Q1 2022 assurance report shows it has reduced the commercial paper in its USDT reserves by 16.8%.. As of March 31, Tether 's $82 billion reserves were 86% cash and cash equivalents, the rest includes $4 billion in corporate bonds, $3 billion secured loans, and $5 billion other investments like cryptocurrencies . A government bailout is also a possibility. As part of that settlement, Tether received a $18.5 million fine, agreed to no longer operate in New York and pledged to provide quarterly reports on its reserves for the next two years.
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