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. 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. Those questions can only be answered with a little more transparency from the stablecoins issuer. However, Tether is very secretive about its holdings, only disclosing that it does hold international commercial paper. "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. The transformation of value in the digital age. 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. 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. 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. Tethers previous public attestations include various short-term deposits and commercial paper kept as reserves to back the USDT stablecoin. "The only interest of Tether is maintaining a liquid and extremely safe portfolio," he said. And despite it seeming as though the stablecoins are in competition, Ardoino believes this will be key to success with regulators. 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. 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 vast majority of the commercial paper held by Tether is in A-2 and above rated issuers.. Evergrande is just the latest major Chinese firm to have serious problems due to apparent fraud or mismanagement. Evergrande is the biggest issuer of commercial paper in the Chinese real estate market, according to Reuters. Something weird happened today in crypto-world. At the same time, hot topics such as regulation, competition and the Evergrande debt crisis are shining a spotlight on that "old information". The struggling real estate giant has listed $300 billion in total liabilities and says it needs to find funds quickly. 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. The downgrade notice was sent to Evergrande on Sept. 15 from China Chengxin International. Or perhaps there are other ways to explain things. The developer on Thursday applied to suspend trading of that unit's. Probing the intersection of crypto and government. 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. All quotes delayed a minimum of 15 minutes. Ardoino clarified that Tether does not hold Evergrande's commercial paper. But he did lay out his timeline expectations for regulation. A report from the end of 2020 shows that Evergrande has just around 10% of the money owed. Cramer has a position in ether, which runs on the Ethereum blockchain. Elon Musks Twitter is dying a slow and tedious death. Be a smarter, safer investor in eight weeks. Which countries have embraced a 4-day workweek and hows it going. A stock exchange filing added that Evergrande was added to a watch list for possible further downgrades in the future. This was later repaid by Bitfinex. ", 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. 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. But these are the same rating agencies that are rating the US Treasuries," Ardoino said. 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. 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. Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28. According to Bloomberg BW, stablecoin issuer Tether has extended billions of dollars in loans to Chinese companies. There is a chance that were currently staring down the barrel of the next financial meltdown.. Markets cant function without transparent information flows, full stop. As one of the first stablecoins, Tether's experienced its fair share of controversies, particularly surrounding the reserves that back its eponymous coin. For critics of Tether, the new economy of digital assets is based on the worlds oldest profession: real estate speculation. Tether is completely unbacked USD that gives these exchanges the liquidity they need to market make derivatives that have non-linear . That should refute anyone who could try to argue USDT may have fueled Chinas boom in commercial paper. The biggest crypto news and ideas of the day. All Rights Reserved. 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. News and analysis for the professional investor. CNBC's Jim Cramer said Monday investors should take profits in their crypto holdings. Your weekly wrap of Web3 news and trends. 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. Which countries have banned TikTok, and why? "Right now, owning crypto is what's known as a 'crowded' trade and I don't want you to lose money if this space keeps getting hit by Evergrande's contagion worries," he said. 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. See here for a complete list of exchanges and delays. 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. var plc588602 = window.plc588602 || 0; The stablecoin issuer says its goal is to reduce its commercial paper holdings to zero. Earlier this year, Tether and Bitfinex settled one of those battles over its reserves with the New York state Attorney General. The Chinese real-estate giant is facing down $300 billion in debt that it cant pay back. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. 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. 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. Evergrande has now had to suspend trading of. Decentral Media, Inc. is not an investment advisor. 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. 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. He holds Bitcoin, Ethereum, and small amounts of other crypto assets. Stablecoins are cryptocurrencies that are pegged to fiat currency on a one-to-one basis. "While old information about Tether's reserves and so on is public, it keeps growing," Ardoino said. personalising content and ads, providing social media features and to CoinDesk journalists are not allowed to purchase stock outright in DCG. According to the Financial Times, this makes Tether one of the world's largest investors in the US commercial paper market. Analysis-Investors grappling with Evergrande fallout weigh risk of wider pain, This sprinting robot could become your next beach lifeguard, Domino effect as more EU institutions ban TikTok on work devices, TikTok is setting time-limits for teens. Hoegner said the commercial paper reserves included amounts held internationally with further sub-custody at major global institutions. In addition to being a major real estate developer, Evergrande is also China's largest issuer of commercial paper (very short-term corporate bonds). 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. Head to consensus.coindesk.com to register and buy your pass now. 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. Evergrande is trying to find a way to cut costs and sell off some of its assets to dig its way out. cookies The biggest crypto news and ideas of the day. read more. 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. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. It is now the third-largest cryptocurrency by market capitalisation, according to CoinMarketCap, making up the bulk of stablecoin volume. Debate swirls about whether that impact would spread beyond China, but theres broad agreement that impact within the country would be near catastrophic. In an interview, stablecoin Tether's tech chief Paolo Ardoino lays out the case for holding commercial paper in its reserves. Tether, the largest stablecoin, is a Hong-Kong based stable currency. Questions for Cramer? It expanded by borrowing aggressively, including during periods when Chinas economic outlook was seen in much rosier terms globally than it is now. 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. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. 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. See here for a complete list of exchanges and delays. NOW WATCH: WATCH: How any business can use live shopping to net thousands of dollars per stream, said every tether coin was fully backed by US dollars in bank accounts. 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. You can subscribe to get the full newsletter here. But tether's growth of around 3,350% since early 2019 is seen as reason to celebrate. 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. Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28. 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 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. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. USDT leads the stablecoin market by trading volume and acts as the top base-pair currency for trading across several large crypto exchanges, including Binance, FTX, and others. different direction, choosing to only use cash reserves and cash equivalents, US Treasury is expected to release an in-depth report on stablecoins. Though its main product since its founding in the 1990s has been housing, Evergrande has grown into a huge conglomerate with products ranging from bottled water to electric cars to a soccer team. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information. Well send you a myFT Daily Digest email rounding up the latest Cryptocurrencies news every morning. Bitcoin, meanwhile, remained above all-time highs by about 5.5%. Evergrande has failed to execute on the promises backing its roughly $300 billion in debt, particularly in housing. Sign up for notifications from Insider! 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". As a result, even though Tether says it doesn't hold commercial paper issued by Evergrande, an upheaval in the commercial paper market could still have wider . David Z. Morris is CoinDesk's Chief Insights Columnist. Stay up to date with what you want to know. Evergrande is trying to find a way to cut costs and sell off some of its assets to dig its way out. var rnd = window.rnd || Math.floor(Math.random()*10e6); "Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so," the company said. Evergrande's main unit had 205.7 billion yuan ($32 billion) worth of commercial paper at the end of 2020, filings show. Smart navigation app uses 3D sound to guide blind people. 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. This article is excerpted from The Node, CoinDesks daily roundup of the most pivotal stories in blockchain and crypto news. Got a confidential news tip? recently accused of violating securities laws. So while Evergrande may not be on the books, the concern is that the commercial paper may be from other real estate firms. Evergrande's main unit had 205.7 billion yuan ($32 billion) worth of commercial paper at the end of 2020, filings show. Learn more about Consensus 2023, CoinDesks longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. In early 2021, Tether paid a fine of $18.5 million to settle a case with the New York Attorney General. 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. 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. Lawrence Lewitinn is CoinDesk's managing editor of global capital markets. Learn more about Consensus 2023, CoinDesks longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. That type of heavy-handed control is at the core of Chinas conundrum as an authoritarian state trying to reap the rewards of capitalism. Perhaps, if one were to scale tether on a different Y-axis like so: Perhaps the tail wags the dog. 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.. A Division of NBCUniversal. Tether operates a so-called stablecoin, which it says is backed one-for-one by dollar assets.