- Circulation of Tether’s USDT has jumped in recent months
- Tether held 85% of reserves in cash and equivalents March 31
By Emily Nicolle and Alberto Brambilla
May 10, 2023 at 7:02 PM GMT+4Corrected
Tether Holdings Ltd., the operator of the largest stablecoin, increased its holdings of US Treasury bills to $53 billion while simultaneously cutting its exposure to cash in the first quarter, following a slate of US bank closures that impacted rivals.
A third-party attestation of the $81.8 billion reserves backing its USDT token as of March 31 showed that around 85%, or $69.3 billion, of the collateral supporting USDT was stored in cash and cash-equivalents. Stablecoins are digital tokens that aim to keep a one-to-one value with a less volatile asset like the dollar, typically by maintaining large reserves as segregated collateral.
The filing, published Wednesday by accounting firm BDO Italia, said more than three-quarters of Tether’s cash-equivalents were stored in short-dated Treasuries, a popular asset among stablecoin issuers and cryptocurrency companies seeking to gain from the rise in yields from traditional financial markets such as bonds. That marked a slight uptick from its holdings in the previous quarter, when such assets made up around 71% of Tether’s cash reserves. At the current rate of 5.23% for three-month bills, Tether would net around $2.8 billion in earnings from such holdings.
Third-party attestations are not the same as financial audits, as they are limited to a snapshot in time and do not allow full access to a company’s books. The quality of assets backing stablecoins like USDT has come under intense scrutiny in recent years, as regulators grew concerned about the liquidity of operators’ reserves and if they could withstand mass redemption requests while under market pressure.
“Our main goal is that we show that we have the money, plus that the majority of what we are making in profits, we’re keeping in the company,” Paolo Ardoino, Tether’s chief technology officer, said in an interview on Wednesday.
The stablecoin USDT has experienced a boom in demand in recent months as its closest rival, Circle Internet Financial Ltd.’s USDC, weathered a series of hits from its exposure to the collapses of Silvergate Capital, Signature Bank and Silicon Valley Bank. As a result, Tether is now on the verge of recovering all of the market value that it lost in the wake of the collapse of algorithmic stablecoin TerraUSD a year ago, with USDT’s circulation hovering about $700 million below its $83.4 billion peak on Wednesday, according to pricing by data provider CoinGecko.