Tether Converts Treasury Profits Into Bitcoin
Tether has purchased 52,670 Bitcoin (BTC) using profits earned from interest on U.S. government Treasuries that back its USDT stablecoin. The move highlights the company’s growing confidence in Bitcoin as part of its reserve strategy and its ability to generate substantial income from rising interest rates.
According to reports, the interest revenue that funded the Bitcoin purchase came amid a 500-basis-point increase in the U.S. federal funds rate over the past 13 months.
Expanding Reserve Strategy
Beyond Bitcoin, Tether’s reserves include $3.3 billion worth of gold and $140 million in corporate bonds. These assets diversify its holdings and strengthen the backing behind the world’s largest stablecoin.
Tether’s total USDT circulation has climbed to $83 billion, indicating continued demand for digital dollars outside traditional banking systems. The company’s market position has been further strengthened by regulatory troubles faced by rivals such as BUSD and Circle’s USDC.
Tether Benefits From Competitor Setbacks
Tether’s expansion comes amid setbacks for other major stablecoins. New York regulators halted the minting of BUSD earlier this year, while Circle temporarily lost access to some of its reserves following the collapse of a U.S. bank in March.
Meanwhile, Tether clarified that it had no exposure to Silvergate Capital, which liquidated voluntarily in early 2023.
Tether mints one USDT for every U.S. dollar received and invests those deposits into liquid financial instruments such as Treasuries to maintain liquidity and stability. However, critics have long accused the company of excessive USDT issuance and insufficient transparency.
Fed Policy Fuels Tether’s Profits
Rising U.S. interest rates have proven highly profitable for Tether. The company reported $1.5 billion in profits during the first quarter of 2023, primarily from Treasury bill yields.
The Federal Reserve’s rate hikes have pushed Treasury yields to 16-year highs, creating favorable conditions for investors like Tether, which holds a large portion of its reserves in short-term T-bills.
A Twitter analyst known as girevik attributed Tether’s Bitcoin acquisition directly to the Fed’s rate policy, noting that higher interest income gave the company the means to expand its BTC holdings.
Regulatory Scrutiny and Transparency
Despite its financial success, Tether remains under scrutiny. The Wall Street Journal recently accused the company of using shell entities to maintain access to U.S. banks after losing its relationship with Wells Fargo in 2018 — a claim Tether has denied.
The company asserts that it complies with anti-money laundering rules under the Financial Crimes Enforcement Network (FinCEN) and continues to operate within U.S. financial regulations.
Outlook
Tether’s move to allocate part of its profits into Bitcoin represents both a hedge and a strategic bet on the cryptocurrency’s long-term strength. As stablecoin demand continues to rise globally and interest rate conditions remain favorable, Tether’s profitability and influence in the crypto ecosystem appear stronger than ever.
