Tether Holdings Ltd.’s USDT token has achieved a significant milestone by briefly surpassing $100 billion in circulation, a first for the world’s largest stablecoin. This landmark event underscores USDT’s dominant position in the cryptocurrency market, particularly as it maintains a one-to-one value with the US dollar. Since the beginning of the year, USDT’s circulation has increased by over 9%, fueled by a surge in Bitcoin demand, which is currently trading at its highest in over two years.
Stablecoins: The Backbone of Crypto Transactions
Stablecoins play a critical role in the cryptocurrency ecosystem, offering traders a less volatile option for exchanging digital assets and safeguarding their wealth. Tether’s reserves for USDT, which support the token’s value, reached $97 billion in December, with more than 76% held in short-dated US Treasury bills. This asset allocation has notably enhanced Tether’s profitability, thanks to rising yields.
Tether’s Expansion and Profitability
With an excess capital of $2.85 billion reported in December, Tether has been investing in various sectors, including industry research and Bitcoin mining. Paolo Ardoino, Tether’s Chief Executive, revealed plans for further expansion into Bitcoin mining in 2024, dedicating around half a billion dollars to the venture.
Dominating the Stablecoin Market
Tether’s market share dwarfs that of its competitors, comprising about 70% of the $142 billion stablecoin sector. This dominance extends far beyond its closest rival, Circle’s USDC, which holds a 19.4% market share. Despite its influence and utility in the crypto world, Tether has faced controversies and regulatory scrutiny, particularly concerning the transparency of its reserves and corporate structure.
Controversies and Regulatory Challenges
In 2021, Tether settled allegations with a US watchdog for more than $40 million, addressing claims of misrepresenting the assets in its collateral pile. The company has since been issuing quarterly attestations of its reserves, though these are not comprehensive audits. Additionally, Tether has been scrutinized for USDT’s alleged use in illegal activities, including terrorism financing and human trafficking, particularly in Asia.
In response to these concerns, Tether has expressed its commitment to combating the criminal use of cryptocurrencies. While its expansion and profitability continue to grow, the company navigates the challenges of regulatory scrutiny and public controversy. As the stablecoin sector evolves, Tether’s influence remains significant, shaping the activities of crypto companies and retail investors alike.
