Tether attracts mainstream media scrutiny over its commercial paper

CNBC's Jim Cramer devoted a half hour to Tether and its commercial paper last week, signalling a new wave of mainstream Tether skepticism.

Tether’s influence on crypto is once again under the spotlight — but this time it’s mainstream media and traditional finance outlets scrutinizing the top stablecoin’s commercial paper.

CNBC’s Jim Cramer (of Mad Money infamy) devoted nearly a half hour to Tether last week.

Nearly in unison, the Financial Times (FT) published a report by Siddharth Venkataramakrishnan and Joe Rennison that wonders where Tether bought its major commercial paper reserves.

Tether published details of what it says backs the US dollar stablecoin in May. Commercial paper backed about half of its then-$40.7 billion market value.

Indeed, Tether raises eyebrows as its purported commercial paper stash would mean it controls larger swaths of the cash equivalent asset than tech giants Google, Amazon, or Apple.

Commercial paper is a form of short-term debt issued by corporations.
These assets are often graded and vetted by the SEC.
Commercial paper issued by blue chip stocks is good, debt from weaker companies is worse.

Commercial paper players say: Tether who?

Superficially, this isn’t really an issue. But Deborah Cunningham, chief investment officer at Federated Hermes (managing half a trillion dollars in customer assets) told FT she’s yet to encounter Tether in the markets.

“We’ve got lots of inquiries and heard lots of discussion, but have not seen any active participation,” said Cunningham.

Another trader at a large bank told reporters: “Until last week we hadn’t really heard of them [Tether]. It was news to us.”

Meanwhile, Mad Money’s Cramer bluntly asked Tether to “open the kimono and agree to be audited by a traditional US accounting firm.”

His reasoning for requesting such transparency goes if Tether indeed holds as much “A-2 and above rated” commercial paper as claimed — and it wasn’t issued by crypto exchanges or affiliates — then Tether should have nothing to hide.

Tether's commercial paper stacked up against the top prime money market funds. — Tether ranked against finance’s biggest fish (chart published by Bloomberg).

Both Cramer and FT highlighted that no one in commercial paper markets is familiar with the Bitfinex sister org.

Cramer even recruited former Commodities and Futures Trading Commission (CFTC) chairman Timothy Massad for his take.

“I’ve talked to a couple people who are involved in trading commercial paper… they’re not sure they see Tether in the markets, so I don’t know what commercial paper Tether is buying,” said Massad.

Bitfinex is no JPMorgan

But just because nobody has seen the name Tether on commercial paper purchases doesn’t mean it isn’t out there buying commercial paper.

There’s little doubt that Tether could’ve used any number of its sister companies and shell corporations to purchase the vast sums — possibly in tranches that could easily go unnoticed.

Still, there’s larger implications for traditional financial markets that few have said out loud. If Tether’s growth continues at current rates, its market value will soon crest $100 billion.

If Tether’s reserve composition stays the same as it disclosed in May, Tether will hold over $50 billion in commercial paper.

Only one entity holds more: the United States’ largest bank, JPMorgan Chase.

Tether controlling more commercial power than JPMorgan stretches believability, but at least Bitfinex and Tether chief tech officer Paolo Ardoino doesn’t seem phased by the mounting mainstream skepticism.

Update 17:01 UTC, June 14: Added bullet points at paragraph six.