Forget USDT — Tether just reaped $4.5bn profit largely from its vast US Treasury portfolio
For years, crypto sceptics questioned whether Tether truly had the dollar reserves to support its world-beating stablecoin USDT, which is now worth $109 billion.
Now Tether reports it’s reaping so much profit from its reserves that it’s starting to resemble an investment fund as much as a stablecoin issuer.
In the first quarter, Tether reported it earned $4.5 billion in profit from its holdings of US Treasury bonds, gold, Bitcoin, and other assets, a 61% jump from the fourth quarter.
“We need to have the vast majority of holdings in something that we can redeem for dollars right at any point in time,” Paolo Ardoino, Tether’s CEO, told DL News in a recent interview. “That’s also why we have Bitcoin and gold. Both are liquid, and we can sell for dollars.”
Funky moment
The news comes as the crypto market experiences a funky stretch of uncertainty. With the Federal Reserve poised to release its latest rate policy stance on Wednesday, Bitcoin has dropped more than 7% in the last 24 hours.
Tether’s good fortune stems from its $91 billion horde of US government debt, according to a report called an “attestation” it released Wednesday. The fixed income instruments are widely considered to be one of the safest assets in the world due to the remote possibility Washington will ever default.
After years of near-zero interest rates, Treasuries have become a boon for fixed income investors as the Federal Reserve raised interest rates to dampen inflation that soared after the Covid-19 pandemic.
The yield on a 10-year Treasury bond is running at around 4.7%.
Tether also holds $5.4 billion worth of Bitcoin and $3.6 billion in gold, according to the attestation prepared by accounting firm BDO. In the last year, Tether’s stablecoin, USDT, has increased its ubiquity as the top means for converting fiat currency to cryptocurrencies.
It has also left behind its closest rival, USDC, which is issued by Circle. USDT is worth more than three times USDC.
The value of its assets in the first quarter exceeded the value of the liabilities, namely the USDT tokens it issued, by more than $6.2 billion, the company said.
Organised crime and USDT
Still, Tether has been dogged by reports that organised criminal groups and other bad actors use USDT to launder dirty money.
A United Nations report published earlier this year found that $17 billion of USDT was tied to underground crypto exchanges, illegal trades, and criminal activities in Southeast Asia.
TRM Labs, a crypto sleuthing company, called USDT the “currency of choice” for terrorism financing. A Chainalysis report showed that stablecoins, including Tether, make up roughly 60% of illicit transactions.
In April, news broke that Venezuela’s state-owned oil giant, PDVSA, was tapping USDT to evade sanctions imposed by the US to punish the South American nation for pursuing anti-democratic policies.
Ardoino vowed to make sure Tether does everything it can to stop sanctioned entities and criminals from using its platform and stablecoin. In recent months, the company has cooperated with US law enforcement officials on money laundering cases.
No sleep
“We don’t sleep at night. We monitor everything we can, but we are not a country,” Ardoino said. “We are not the police.”
The CEO also told DL News that the firm is trying to persuade a Big Four accounting firm — KPMG, EY, Deloitte, or PwC — to take it on as an auditing client. They have declined to do so, Ardoino said, because of “reputational risk.”
Liam Kelly is a Berlin-based DL News’ correspondent. Contact him at [email protected].
