Stablecoins’ Reserves

Recently we dove into Tether, the largest stablecoin by market value, noting their reserves were being questioned by many in the crypto world. In times of stress, it is vital that a stablecoin maintains its peg to the dollar. This becomes somewhat difficult to do if reserves are held in assets that aren’t truly cash equivalents. The graphic below shows half of Tether’s reserves were commercial paper as of March 31. However, they also held a somewhat ambiguous category of fiduciary deposits, digital tokens like USDC, corporate bonds, secured loans and precious metals.



Earlier this week, Tether released an updated look at their reserves, now through June 30. Whether due to recategorizations or an actual shifting of assets, their latest attestation shows a much larger concentration in assets most would consider cash equivalents. As the graphic below shows, nearly half of their reserves still reside in commercial paper/CDs (orange). However, another quarter of their reserves are now in T-bills (green). Their prior attestation showed a 2% allocation to T-bills. An additional 10% of their reserves are now in cash/deposits, up from 3%.

The category of ‘fiduciary deposits’ no longer exists, so some of this is likely a recategorization to make their holdings clearer. However, many of the categories that were previously being questioned as cash equivalents are now smaller. Secured loans went from 13% of assets to 4%. Corporates and precious metals went from 10% to 7.7%. Simply put, Tether appears to have heeded the market’s concerns and beefed up its cash position.



In another interesting twist on the stablecoin front, USDC released a granular attestation of reserves in mid-July. Prior attestations did not offer a breakdown of the actual assets in their vault, but Circle always stated USDC was 100% backed by cash in a vault. As the graphic below shows, USDC’s reserves are not quite that straightforward. They are mostly concentrated in cash equivalents. In fact, their cash (blue), CDs (yellow), Treasuries (green) and commercial paper (orange) make up almost 95% of their reserves. However, prior to this attestation, many believed USDC was backed 1:1 by cash only.



Between the two largest stablecoins, USDC appears to be the safer play based on a breakdown of reserves. However, it should be noted that both USDC and Tether are run by centralized organizations, which might make them more susceptible to regulatory issues than a more decentralized stablecoin such as Dai. That aside, it appears the push for more transparency on stablecoins’ reserves has been heard loud and clear. This will likely prove important as government officials around the world set their sights on the digital currencies’ place in relation to CBDCs.