In a recent audit conducted by Tether, the issuer of the prominent stablecoin USDT, the company’s profits have reached record-breaking levels. The report, released on July 31st, offers insights into Tether’s reserves, which are now supporting nearly $84 billion worth of tokens.
The audit, carried out by BDO in accordance with international standards, involved rigorous verification of the documents provided by Tether through various methods. According to the report, as of June 2023, Tether possesses $86.449 billion in reserves, adequately backing $83.178 billion worth of Tether tokens. Consequently, Tether holds an impressive surplus of $3.3 billion.
This surplus represents the company’s profit, which will not be distributed to shareholders. Instead, it will bolster the reserve, exceeding the token value by four percent. Tether’s business model has proven to be incredibly lucrative, especially during times of high interest rates, with a profit of one billion just between April and June.
The report also offers a comprehensive breakdown of the reserves. Around 85 percent is allocated to “cash” or cash-like assets, while the remaining 15 percent is invested in slightly more volatile assets.
A notable revelation is Tether’s significant dependence on US government bonds. The company directly holds $55.809 billion in government bonds and indirectly invests in them through money market funds and overnight repos, resulting in a total holding of US government bonds worth $72.5 billion.
Among Tether’s other, more volatile reserves are secured loans ($5.5 billion), precious metals ($3.27 billion), bitcoins ($1.67 billion), and other investments ($2.365 billion). Notably, Tether has continued to invest in bitcoins, albeit in relatively smaller amounts, acquiring around 3,000 coins.
In perspective, Tether’s holdings amount to just over 0.1 percent of the approximately $30 trillion worth of US Treasury bonds in circulation. This makes Tether potentially the largest private financier for the US government. In comparison, its holdings of government bonds almost rival those of countries like the Netherlands ($74.4 billion) and Germany ($87.4 billion).
Given these numbers, there is a growing concern that Tether might be approaching the status of “too big to fail.” The significance of its financial influence on the US government calls for careful consideration and monitoring of its operations moving forward.