Evergrande and Crypto

What does the Evergrande debt crisis mean for crypto?

You may have heard, there is a real prospect that Evergrande, one of the largest property developers in China, could default on debts worth up to $300bn.

Fitch, the ratings agency, has said it is likely that Evergrande will default as it is unable to raise capital quickly enough in order to service its growing levels of debt.

The Evergrande share price is down by over 50% in the last month as fears mount over the potential ramifications for the wider Chinese economy.

Now, out of nowhere, there have been suggestions that the real estate developer’s collapse could have a knock-on effect on the crypto industry.

As reported by CoinTelegraph, David Llewellyn-Smith, an Australian economist, suggested that Tether, one of the leading issuers of stablecoins, could be exposed to commercial paper issued by the “$300bn debt monster”.

He added that Bitcoin may comprise one of Evergrande’s counterparties via Tether’s dominance as a Bitcoin pairing.

Tether has denied holding any commercial paper issued by the real estate giant amid concerns that Evergrande’s struggles may impact the commercial paper market.

Commercial paper is a typically used type of unsecured, short-term debt instrument issued by businesses, usually for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities.

“Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so,” said a spokesperson for Tether.

“As we have indicated in our published statements and in 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.”

Reports suggest that Evergrande is still looking into its options regarding an extension of its obligations, while it has been claimed that a bailout request from the company’s founder has been rejected by authorities in Guangdong.