Now they claim to be backed by cash and cash equivalents, namely a lot of "commercial paper" (short term debt obligations), which is widely believed to be in Chinese markets.
For some reason though, they won't reveal exactly what it is they hold. It could be that they think the market will not react kindly to the kind of assets they hold, or that they entered some kind of weird agreement no to reveal them.
I highly doubt they're not backed by assets whose face value adds up to the total UST distribution, because multiple auditors have said they were fully backed. But it is possibly that some of these assets are junk that won't (or have a high risk not to) redeem at face value.
Even in very bad scenarios, UST could fall to 0.8$ if 20% of Tether's asset default (and they burned through profits). Problematic but not quite such as a risk as it going to zero, which is why people still hold it.