(Bloomberg) — There’s probably no coin in the crypto world that’s more scrutinized than Tether.

It’s a so-called stablecoin, which trades on a public blockchain and has maintained a 1-to-1 peg against the dollar, based on assets that the company holds in reserves. You can think of it as a little bit like a money-market fund meets bearer asset. Earlier this week it published a chart of the composition of its holdings, showing the majority of its assets to be in cash and cash equivalents, the bulk of which is commercial paper.

On Friday evening, JPMorgan rates derivatives strategist Josh Younger — who has been writing more and more on crypto lately — published a new note on stablecoins and their interaction with the commercial paper market.

This one chart shows just how big of a player they are now in the space.

Younger writes:

Whether the allocation of the Tether reserve is representative of other, smaller stablecoins is unknown. A key question is why they would choose to rely more heavily on commercial paper, which brings with it more logistical and relative value considerations around credit and maturity than comparatively simpler bank deposits. There are three reasons in particular to believe Tether has and will continue to face difficulty accessing the domestic banking system—particularly at the scale required to absorb a meaningful fraction of their already sizeable reserve funds. First, their holdings are likely offshore, and not necessarily in the Bahamas. Second, recent guidance from the OCC authorizes domestic banks under their supervision to accept deposits from stablecoin issuers only if those tokens are fully reserved (among other requirements), which Tether has admitted to misrepresenting and violating in their recent settlement with the NYAG Office. Finally, these admissions as well as other concerns will likely raise reputational risk concerns among larger domestic banks that can accommodate a material fraction of those reserve assets.

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He adds, and this is key:

This may seem an extended discussion for what essentially amounts to a modest segment of the commercial paper market. It is worth bearing in mind, however, that this market has the potential to grow significantly.

Cryptocurrencies have been tanking lately, but that’s really nothing new. The space has always been volatile and everyone who plays in it is aware that huge drawdowns happen pretty frequently for reasons that are hard to anticipate or explain. However if you’re thinking about how the crypto world could become a source of serious consideration for regulators, it may be in assets more connected to financial market plumbing.

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