Investors withdraw over $7 billion from tether, raising fresh fears about stablecoin's backing

cnbc.com:

Investors have withdrawn more than $7 billion from tether since it briefly dropped from its dollar peg, raising fresh questions about the reserves underpinning the world's largest stablecoin.

Tether's circulating supply has slipped from about $83 billion a week ago to less than $76 billion on Tuesday, according to data from CoinGecko.

The so-called stablecoin is meant to always be worth $1. But on Thursday, its price slipped as low as 95 cents amid panic over the collapse of a rival token called terraUSD.

Most stablecoins are backed by fiat reserves, the idea being that they have enough collateral in case users decide to withdraw their funds. But a new breed of «algorithmic» stablecoins like TerraUSD, or UST, have attempted to base their dollar peg on code. That's been put to the test lately as investors have soured on cryptocurrencies.

Previously, Tether claimed all its tokens were backed one-to-one by dollars stored in a bank. However, after a settlement with the New York attorney general, the company revealed it relied on a range of other assets — including commercial paper, a form of short-term, unsecured debt issued by companies — to support its token.

The situation has once again placed the subject of the reserves behind tether under the spotlight. When Tether last disclosed its reserve breakdown, cash made up around $4.2 billion of its assets. The vast majority — $34.5 billion — consisted of unidentified Treasury bills, while $24.2 billion of its holdings was in commercial paper.

These «attestations» produced by Tether each quarter are signed off by MHA Cayman, a Cayman Islands-based firm which has only three employees, according to its LinkedIn profile.

Tether has faced repeated calls for a full audit of its