"An industry is not an industry if there is only one player, instead having many players with different offerings with different use cases is really helpful in a moment when you have to talk with the regulator," Ardoino said. It is now the third-largest cryptocurrency by market capitalisation, according to CoinMarketCap, making up the bulk of stablecoin volume. As demand for tether grew, market participants started to question whether that was the case. 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. But since it's unsecured, there is also very little recourse for investors if an issuer does default. "Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so," the company said. This type of debt financing is back in the limelight as China's second largest property developer Evergrande teeters on the brink of 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. By signing up, you will receive emails about CoinDesk products and you agree to ourterms & conditionsandprivacy policy. Tether operates a so-called stablecoin, which it says is backed one-for-one by dollar assets. "Tether said they have no Evergrande exposure," Cramer acknowledged. Since Evergrande's potential collapse could have broad implications for the commercial paper market and Tether's most recent attestation contains no breakdown of either the geographical exposure or investment category of the paper it holds, market participants are concerned about the risks to Tether's books. The transformation of value in the digital age. Debate swirls about whether that impact would spread beyond China, but theres broad agreement that impact within the country would be near catastrophic. Tether said that it funnelled roughly half its reserves into commercial paper. His role is much broader than tech chief. Commercial paper typically has low default rates. 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. Cash made up only 2.9 per cent, according to the companys disclosure. That type of heavy-handed control is at the core of Chinas conundrum as an authoritarian state trying to reap the rewards of capitalism. 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. document.write(''); Stablecoin Tether says it does not hold any commercial paper from Evergrande in recent a statement. Our Standards: The Thomson Reuters Trust Principles. 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Who to fire? cookies 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. 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. Hundreds of customers have protested in front of the companys offices alleging mistreatment or fraud. 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. "We are working with an amazing counterparty that is extremely professional and has a deep knowledge of traditional finance and also crypto markets and the blockchain industry and so on. In total, Tether holds 52% US Treasury bonds, 37% commercial paper, with the remainder in cash and money market funds. and other data for a number of reasons, such as keeping FT Sites reliable and secure, Hit him up! 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. Tether, Bitcoin and Chinese Commercial Paper at Scale Webinars Indices Markets Finance Technology Web3 Policy Sponsored Content Upcoming event Yuga Labs, Google and More TV & Videos TV & Videos. madcap@cnbc.com. He is also now CTO of cryptocurrency exchange Bitfinex. That should refute anyone who could try to argue USDT may have fueled Chinas boom in commercial paper. Cramer said his crypto concerns right now begin with tether, a stablecoin that's pegged to the U.S. dollar. A report from the end of 2020 shows that Evergrande has just around 10% of the money owed. "So if you own crypto in any form and you've got big gains, I recommend taking something off the table.". Crypto Long &. Overall, the studio has a watchful eye. Evergrande has now had to suspend trading of that units onshore corporate bonds following a downgrade, another red flag pointing towards an impending default. For critics of Tether, the new economy of digital assets is based on the worlds oldest profession: real estate speculation. 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. read more. 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". 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. Sell some, stay long the rest, then let's wait and see if China changes its attitude toward an Evergrande bailout.". 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 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. Additionally, it is China's largest issuer of commercial paper with more than $300 billion in debt, according to reports. Given Tethers record to this point, that may take a while. Ardoino wouldn't comment on whether the Treasury directly spoke to Tether for the report. More Articles Evergrande has now had to suspend trading of that unit's onshore corporate bonds following a downgrade, another red flag pointing towards an impending default. 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. In response to the Bloomberg BW report, it released a blog post claiming that the report is spreading misinformation.. Earlier this year, Tether and Bitfinex settled one of those battles over its reserves with the New York state Attorney General. But Stuart Hoegner, Tethers general counsel, said: With respect to reputation, we believe we are seeing the opposite: more and more counterparties are comfortable with Tether and our transparency initiatives and are keen to work with us.. We use cookies to improve your experience. The Chinese real-estate giant is facing down $300 billion in debt that it cant pay back. Evergrande's main unit had 205.7 billion yuan ($32 billion) worth of commercial paper at the end of 2020, filings show. The $1.1tn commercial paper market is vital for large companies looking to raise cash for short-term needs such as payroll and inventories. 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. Which countries have embraced a 4-day workweek and hows it going. In the NYAG investigation, the company was found to be conducting illegal activities in New York. 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. Well, think of a detective in a movie who takes a corkboard, some photos and a lot of white strings to put all the parts of a story together. 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. BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back. Understanding the magnitude of size and growth of USDT, bitcoin and Chinese commercial paper may help give some perspective to the latest headlines. Evergrande's main unit had 205.7 billion yuan ($32 billion) worth of commercial paper at the end of 2020, filings show. 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. Evergrande, China's second-largest property developer, is to blame. 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. 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. Tether has faced scrutiny from authorities and investigators in the past. Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28. The downgrade from A to AA applies both to the bonds and their issuer rating. According to documents received byBloomberg BusinessWeek, Tether has extended billions of dollars in loans to large Chinese companies. Regulators are starting to pay greater attention to stablecoins - digital tokens which are pegged in value to other assets, often the U.S. dollar, and backed by a pool of assets - and some observers have raised concerns about the tokens' liquidity in a time of stress. 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. The enshittification of apps is real. How much of it is Chinese or specifically from Evergrande is unclear. Evergrande has failed to execute on the promises backing its roughly $300 billion in debt, particularly in housing. ConsenSys to Launch zkEVM Testnet as Battle for ZK Supremacy Heats Up, Binance Continues to Battle FUD as US Senators Go After Balance Sheets, Coinbase Moves Into More Stable World of Asset Management with Latest Acquisition, EOS Pumps 10% Amid Broader Market Correction due to EVM Speculation. In May, it provided a breakdown of these reserves, which Tether claims included just under $30bn in commercial paper, a short-dated investment similar to cash. To a fair extent, staying in the same playing field as Evergrande makes Tether susceptible to the domino effect. 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. Tether has amply demonstrated, most recently through assurance opinions from [auditor] Moore Cayman, that all issued tethers are, in fact, fully reserved, he added. The information on this website is subject to change without notice. Polygon (MATIC) Price Dropped 9% in One Day so Wheres It Headed Next? While Tether (the company) said back in September it doesn't hold Evergrande commercial paper, about a month ago Bloomberg BusinessWeek reported Tether's holdings included "billions of. These frauds even show some sign of being tacitly approved by the Chinese government, to the extent that they have targeted investors abroad. It goes something like this: About half of all bitcoin trades against stablecoin tether (USDT), according to data from CryptoCompare. 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. CoinDesk journalists are not allowed to purchase stock outright in DCG. You can subscribe to get the full newsletter here. The developer on Thursday applied to suspend trading of that unit's. Get the latest business insights from Dun & Bradstreet. But these have frequently raised more questions than answers. The "Mad Money" host said the struggles of Chinese developer Evergrande are likely to keep weighing on crypto markets. The latest moves in crypto markets, in context. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. 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. Markets cant function without transparent information flows, full stop. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information. What financial advisors need to know about crypto. "Tether has maintained its stability . In February, the operator and the related trading platform Bitfinex pledged to offer more transparency on its reserves under the terms of an $18.5m settlement with the New York attorney-generals office, leading to the most recent disclosures last month. However that's not stopped its popularity. Evergrande's main unit had 205.7 billion yuan ($32 billion) worth of commercial paper at the end of 2020, filings show. As we have indicated in our published statements and our most recent assurance attestation with a reporting date of June 30, 2021, the vast majority of the commercial paper held by Tether is in A-2 and above rated issuers.. A Bloomberg report has claimed to have found that Tether holds billions of dollars worth of Chinese commercial paper. Regulators are starting to pay greater attention to stablecoins digital tokens which are pegged in value to other assets, often the U.S. dollar, and backed by a pool of assets and some observers have raised concerns about the tokens liquidity in a time of stress. 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, About half of Tethers roughly $75 billion in assets, Tether (the company) said back in September. HONGKONG Tether, the worlds 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. It seems increasingly likely that Evergrande is fated instead for the glue factory. Approximately half of Tethers $62.8 billion assets as of the end of June 2021, were backed by commercial paper and certificates of deposit, according to the company. Tether is the third-largest cryptocurrency by market value, trailing only ether and bitcoin, which are second and first, respectively. An additional 20% reduction is to show up on the company's Q2 report. Investors aren't only looking at audits, there's also regulation. This is not the first time concerns about the true value of USDT have emerged. 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. Tether has been beset by transparency concerns in the past as well. Regardless of what commercial paper you hold, bonds and commercial paper would take a hit and some issuers may even fold," tweeted Adam Cochran, partner at Cinneamhain Ventures. The report investigated the quality of assets backing USDT, and alleged the debt assets supporting Tether dollar reserves may of questionable nature. Consider this - most of the reserve assets Tether holds to support its USDT are commercial papers (CPs) and certificate of deposits (CDs) instead of the US dollar. Questions for Cramer? 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. 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. It is also alleged that Tether also owns commercial paper issued by Evergrande, Chinas second-largest real estate developer, which is itself experiencing a major liquidity crisis. The industry leader for online information for tax, accounting and finance professionals. The downgrade notice was sent to Evergrande on Sept. 15 from China Chengxin International. Stablecoins are rarely on the tips of investors' tongues when it comes to talking about the volatility-filled headline-grabbing crypto market. According to the Financial Times, this makes Tether one of the world's largest investors in the US commercial paper market. Tether has vehemently dismissed the claims and has stated it maintains the full value of the reserves backing its stablecoin supply. But is it bad? Bitcoin and other cryptocurrencies were crashing Monday amid a global selloff in risk assets. Evergrande is trying to find a way to cut costs and sell off some of its assets to dig its way out. The stablecoin issuer says its goal is to reduce its commercial paper holdings to zero. Your Use of the Site. Siddharth Venkataramakrishnan and Joe Rennison. CNBC's Jim Cramer said Monday investors should take profits in their crypto holdings. Your weekly wrap of Web3 news and trends. The stablecoin issuer Tether this week declared that it doesnt hold short-term debt issued by troubled Chinese real estate developer Evergrande. Elon Musks Twitter is dying a slow and tedious death. But he did lay out his timeline expectations for regulation. Last March, the Federal Reserve stepped in to buy commercial paper as the pandemic led money market funds, one of the biggest buyers, to pull back. HONG KONG, Sept 16 (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 (3333.HK), as regulatory scrutiny into risks from this type of token grow. Tether grants you a limited license to access and make personal use of the Site. "The case is you have two choices, you trust the rating agencies, or you don't trust them. 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. A stock exchange filing added that Evergrande was added to a watch list for possible further downgrades in the future. 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. Hoegner said the commercial paper reserves included amounts held internationally with further sub-custody at major global institutions. Stay up to date with what you want to know. 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. The most recent attestation states the average credit rating of its commercial paper holdings is "A-1" - an investment grade based on the ratings scale of Moody's Investor Services, a ratings agency. 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. In November 2018, it had to transfer a substantial portion of its backing to Bitfinex after a loss of funds, meaning that it no longer met its claim of being fully backed by US dollars. Be a smarter, safer investor in eight weeks. It expanded by borrowing aggressively, including during periods when Chinas economic outlook was seen in much rosier terms globally than it is now. Lab leak theory: 3 years on, will we ever know where COVID came from? 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? Tether has revealed that its commercial paper holdings would be $3.5 billion by July 31. We want to hear from you. See here for a complete list of exchanges and delays. Since Tether doesnt disclose specifics about the commercial paper that substantially backs its stablecoin, this is a bit like serving a houseguest a sandwich and loudly assuring them that it is absolutely NOT made from diseased horsemeat. The downgrade from A to AA applies both to the bonds and their issuer rating. Well send you a myFT Daily Digest email rounding up the latest Cryptocurrencies news every morning. Evergrandes main unit had 205.7 billion yuan ($32 billion) worth of commercial paper at the end of 2020, filings show. Tether is a typical design firm that will value the client's needs over their employees. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. That marks a significant decrease in commercial paper, from $24 billion to $20 billion in the first quarter of 2022. All Rights Reserved. We do not give personalized investment advice or other financial advice. Be a smarter, safer investor in eight weeks. See here for a complete list of exchanges and delays. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Learn more about Consensus 2023, CoinDesks longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. CoinDesk journalists are not allowed to purchase stock outright in DCG. analyse how our Sites are used. What does one have to do with the other? "So if A1 commercial paper rated by a US Agency is considered safe [then] why is where the issuer located matters?". The most recent report from accountant Moore Cayman shows more than 50% of the assets backing a tether coin were commercial paper and certificates of deposit, rather than dollars, or short-term government paper. 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. Sign up for Crypto for Advisors, our weekly newsletter defining crypto, digital assets and the future of finance. What financial advisors need to know about crypto. While Tether (the company) said back in September it doesnt hold Evergrande commercial paper, about a month ago Bloomberg BusinessWeek reported Tethers holdings included billions of dollars of short-term loans to large Chinese companies something money-market funds avoid.. "If tether collapsed, well, then it's going to gut the whole crypto ecosystem," he said. "So Tether is extremely glad that there is a USDC, that there is Paxos and all the other stablecoins, because that is how we become an industry.". USDT is designed to be pegged to U.S. dollar at a 1:1 ratio, thereby making it possible to trade crypto assets without relying on traditional banking services by providing a stable unit of account. With Tether we are welcoming all that. 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. Ardoino clarified that Tether does not hold Evergrande's commercial paper. 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 . 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