Tether’s circulation supply has dropped from $83 billion last week to $76 billion on Tuesday, according to CoinMarketCap. Since this largest stablecoin briefly lost its US dollar peg, investors started swapping crypto for dollars, draining Tether’s reserves. This drop coincided with the collapse of another major stablecoin, UST, and its sister cryptocurrency, LUNA.
In a blog post, however, Tether Operations Limited emphasized that the withdrawal did not signal a “run on the bank” scenario: “Since May 11, Tether has successfully processed $7 billion of USDT redemptions for verified individuals. Every redemption request which was submitted was redeemed in full.”
Unlike the UST, which relies on algorithms to dynamically maintain its one-to-one peg to the US dollar, tether is backed by cash and other equivalent assets. Paolo Ardoino, chief technology officer of Tether, said on Twitter: “We redeemed 7B in 48h, without the blink of an eye. How many institutions can do the same? We can continue if the market wants, we have all the liquidity to handle big redemptions and play 1:1. Yes, Tether is fully backed.”
Tether says it has billions of dollars in reserves, including US government debt and corporate bonds, to help process transactions and withdrawals. However, details about those corporate bonds, such as the identities of the issuers, remained undisclosed. And Tether is also reluctant to reveal more about its government debt holdings.
Tether has faced accusations of not having enough cash reserves to back the stablecoin. Last year, Tether and Bitfinex agreed to pay a fine of $18.5 million to settle an investigation by the New York state attorney general, alleging that the two companies covered up to hide a loss of $850 million of commingled client and corporate funds.
USDT has maintained its value at $1, although the stablecoin briefly dipped near 99 cents on Monday. Tether said it “never failed to process a request for USDT of $1” per tether.
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