Tether bolsters its reservations: Will it silence critics, appease investors?

USDT under attack from short sellers. Would they disappear if only the company hired a Big Four accounting firm to audit its balance sheet?

There is an old Arabic proverb: "The dogs bark, but the caravan moves on." That could sum up the journey to date of Tether (USDT), the world's largest stablecoin.

Tether has been embroiled in legal and financial wrangling throughout its short history. There have been lawsuits for alleged market manipulation, accusations from the New York State Attorney General that Tether lied about its reserves – costing the company $18.5 million in fines in 2021 – and this year, questions expressed by US Treasury Secretary Janet Yellen as to whether USDT could maintain its peg to the US dollar. More recently, investment short sellers "have increased their bets against Tether," The Wall Street Journal reported on June 27.

But Tether has weathered all those storms and seems to keep moving forward, like the proverbial caravan. On July 1, the company announced that it had significantly reduced the amount of commercial paper in its reserves, which has been a sore point for critics for some time.

Tether's commercial paper reserves are expected to reach a new low of $3.5 billion by the end of July, from $24.2 billion at the end of 2021. The company added that its "aim remains to bring the number zero".

Many stablecoins like Tether are substitutes for the US dollar, and they are supposed to be backed 1:1 by liquid assets like cash and US...