The stablecoin leader is starting to look more like an investment fund thanks to its reserves. CEO Paolo Ardoino is keen to erase Tether’s controversial past. Tether sets a bullish record in a market filled with uncertainty.
For years, crypto skeptics have questioned whether Tether really had enough dollar reserves to support the world’s most powerful stablecoin, USDT, currently worth $109 billion.
Tether now reports that it is making so much money from its reserves that it is starting to resemble an investment fund as well as a stablecoin issuer.
In the first quarter, Tether reported $4.5 billion in profits from its holdings in U.S. Treasuries, gold, Bitcoin and other assets, a 61% increase from the fourth quarter.
“We need a large portion of our holdings to be readily convertible into dollars at any time,” Tether CEO Paolo Ardoino told DL News in a recent interview. “That’s also why we have Bitcoin and gold. Both are liquid and can be sold for dollars.”
funky moment
This news comes as the crypto market is experiencing some funky uncertainty. Bitcoin has fallen more than 7% in the past 24 hours as the US Federal Reserve is scheduled to announce its latest interest rate policy stance on Wednesday.
Tether’s fortunes stem from a massive $91 billion in U.S. government debt, according to a report called “Certificates” released by Tether on Wednesday. Bonds are widely considered to be among the safest assets in the world because there is little chance of Washington defaulting.
U.S. Treasuries have been a boon for bond investors after years of near-zero interest rates as the Federal Reserve raised interest rates to curb soaring inflation after the coronavirus pandemic. It becomes.
The yield on 10-year U.S. Treasuries is hovering around 4.7%.
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Tether also holds $5.4 billion worth of Bitcoin and $3.6 billion worth of gold, according to certificates prepared by accounting firm BDO. Over the past year, Tether’s stablecoin USDT has gained popularity as the primary means of converting fiat to cryptocurrencies.
It also left behind its closest rival, USDC, issued by Circle. USDT is worth more than three times as much as USDC.
The company said that in the first quarter, the value of its assets exceeded its liabilities, or the value of the USDT tokens it issued, by more than $6.2 billion.
Organized Crime and USDT
Still, Tether has been plagued by reports that organized crime groups and other bad actors are using USDT to launder dirty money.
A United Nations report released earlier this year found that $17 billion in USDT is tied to underground cryptocurrency exchanges, illicit trade, and criminal activity in Southeast Asia.
Cryptocurrency research firm TRM Labs called USDT the “currency of choice” for terrorist financing. According to a report by Chainalysis, stablecoins, including Tether, account for about 60% of illegal transactions.
In April, news broke that Venezuela’s state oil giant PDVSA was using USDT to circumvent sanctions imposed by the United States to punish the South American nation for pursuing anti-democratic policies.
Ardoino vowed that Tether would do everything in its power to prevent sanctioned entities and criminals from using its platform and stablecoins. The company has been cooperating with U.S. law enforcement authorities in recent months regarding money laundering cases.
I can’t 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 company is trying to persuade the big four accounting firms (KPMG, EY, Deloitte and PwC) to take on them as audit clients. They refused to do so, citing “reputational risk,” Ardoino said.
But Tether is growing. The company employs about 80 people and plans to add 50 more this year, Ardoino said.
Updated on May 2nd to include head count data.
Liam Kelly is a correspondent for DL News based in Berlin. Please contact liam@dlnews.com.
