In a recent announcement, Tether, the issuer of the industry’s leading stablecoin, revealed its plans to start buying Bitcoin regularly to enhance its excess reserves. The company intends to dedicate up to 15% of its net realized operating profits to purchase the world’s premier cryptocurrency, beginning this month.
“Bitcoin, with its proven resilience, has established itself as a long-lasting value store with significant growth potential,” says Paolo Ardoino, Tether’s Chief Technology Officer. “Its limited supply, decentralized nature, and widespread adoption make Bitcoin an attractive choice for both institutional and retail investors.”
Implications for the Stablecoin Industry
Tether is known for minting USDT, the third-largest cryptocurrency after Bitcoin and Ethereum, and the largest stablecoin in the industry. Stablecoins are a type of cryptocurrency whose values are pegged to stable assets like the U.S. dollar.
According to an assurance report from March, Tether currently holds Bitcoin worth around $1.5 billion in its reserves. The amount set aside for this new investment strategy will be based on realized profits, excluding unrealized gains from price increases within the portfolio.
Ardoino stated on Twitter that the company has accumulated $2.5 billion in excess reserves, in addition to the 100% reserves backing the issued tokens, largely due to interest rates on U.S. Treasury bills and other investments like gold.
High Profits amidst Criticism
Despite recent claims of “tremendous success” and boasting net profits of $1.48 billion in the first quarter, Tether has faced criticism. Some skeptics, including former SEC enforcement attorney John Reed Stark, have questioned the company’s reserve claims, labeling its regular unaudited attestations as “meaningless.”
These critics worry about the adequacy of Tether’s disclosure regarding the U.S. dollar reserves purportedly backing USDT.
