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.
(Bloomberg) — 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.
Other Investments
The amount of Tether’s reserves held with money-market funds was largely unchanged quarter-on-quarter at $7.5 billion, the attestation showed, while its holdings in cash and bank deposits fell significantly from $5.3 billion to just $481.4 million.
This decline was due to steps being taken to reduce the firm’s reliance on bank deposits and shift toward leveraging the reverse repo market, Tether said in a statement, which accounted for $8.3 billion of its holdings.
The firm’s “other investments”, which includes digital tokens, was broken out for the first time to specify that $1.5 billion in assets were held in Bitcoin.
Tether also listed around 6.5% of its reserves in secured loans to non-affiliated entities, a practice that the firm said it would wind down in 2023 after it emerged that Tether had loaned assets to bankrupt crypto lender Celsius last year.
In a statement on the attestation, Tether said it had recorded a first-quarter “net profit” of $1.5 billion, more than double the $700 million forecast that Ardoino had predicted in late March.
Its profit figures are not included in the attestation, and a Tether spokesperson didn’t immediately respond to a request for clarification on how its net income had increased by such a margin.
In August, Tether said it would soon publish filings on a monthly basis, in addition to seeking a full financial audit.
The firm hopes to be on a monthly schedule by the end of this year, Ardoino said, but added it had no strict timeline for when a full audit might be ready.
He added that he expects Tether to be profitable again in the coming quarter.
It also plans to increase hiring for its teams overseeing USDT to reach around 90 people, he said, up from roughly 60 employees at present.
(Corrects to remove an erroneous time reference regarding Circle’s attestations in the second to last paragraph.)
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