Tether’s assurance report reveals over $3.3 billion in excess reserves, generating profits used as insurance to back its USDT tokens, solidifying its strong financial position.
- Tether releases assurance report, holding over $3.3 billion in excess reserves to back USDT tokens.
- Profits used as insurance, not distributed to shareholders, generating $1.5 billion in Q1 and over $1 billion in Q2.
- Tether’s consolidated total assets amount to $86.5 billion, with liabilities at $83.2 billion, leaving a surplus of nearly 4%.
- 85% of Tether’s assets are in “cash and cash equivalents,” with a small portion of profits invested in the Bitcoin mining industry.
Tether, the largest stablecoin issuer globally, has released an assurance report that reveals its financial status as of June 30. The report shows that Tether now holds over $3.3 billion in excess reserves to back its USDT tokens, positioning the company with a significant surplus.
Tether Excess Reserves increase by 850M to reach $3.3B as Leading Stablecoin Reveals $72.5B overall exposure in US T-Bills and Unveils Energy-Related Investments.
— Tether (@Tether_to) July 31, 2023
Profits Used as Insurance
Tether attributes its excess reserves to the profits generated by its existing reserves. These profits are not distributed to shareholders but are instead used as insurance to back the tokens. The USDT tokens are designed to maintain parity with the US dollar and are always convertible 1:1 within the company’s reserves.
In a blog post, Tether highlights its commitment to transparency by disclosing its direct and indirect exposure to US Treasury bills and the Treasuries collateralizing the Overnight Repo. When aggregated, the amount of Treasuries backing Tether’s stablecoins totals approximately $72.5 billion.
The company generated $1.5 billion in net profit in Q1, followed by over $1 billion from April to June. Out of the Q2 profit, $115 million went towards share buybacks, while the rest was allocated to the excess reserves.
Tether’s Strong Financial Position
Tether’s consolidated total assets amounted to $86.5 billion as of June 30, with liabilities totaling $83.2 billion. Of the liabilities, $83.17 billion can be attributed to digital tokens issued by Tether. This leaves Tether with a surplus of nearly 4%, dispelling previous concerns about the company’s reserves and solvency.
Paolo Ardoino, Tether’s CTO, emphasized the importance of reliable reserves as a counterbalance to recent bank failures caused by fractional reserve lending and duration mismatches.
In Q1, Tether disclosed that 2% of its reserves were held in Bitcoin (BTC), a departure from the previous trend of stablecoin issuers relying solely on US government debt. Circle, Tether’s rival company and issuer of USDC, also generates profits primarily from government debt, with the rest of its reserves in cash.
Tether’s latest report reveals that 85% of its assets are in “cash and cash equivalents,” indicating high liquidity. While the report does not provide updates on Tether’s Bitcoin allocation, Ardoino clarified that only a small portion of the company’s profits are invested in the Bitcoin mining industry.
Overall, Tether’s assurance report showcases its robust financial position, with significant excess reserves and a strategic allocation strategy that includes both traditional assets and Bitcoin.