Crypto-asset firm Tether claims it has approximately $1.6 billion in excess reserves in order to fully back the issuance of its USDT stablecoin.
Tether expects to record a $700 million profit in this latest March 2023 quarter, which will be taking its total excess reserves to more than $1 billion. This, according to a report from CNBC, which referenced statements made by the firm’s CTO.
Ardoino shared the most recent estimates while trying to defend Tether’s record of backing its USDT stablecoin with real-world assets.
As first reported by CNBC, the value of all USDT currently in circulation has increased significantly this past month from around $70.98 billion on March 1, 2023 to $78.14 billion on Thursday, according to the latest data from CoinMarketCap.
This substantial growth is attributed in part to traders preferring USDT after competitor Circle, which issues the stablecoin USDC, stated that it had exposure to the failed Silicon Valley Bank.
Tether is the entity that issues the USDT stablecoin, which is reportedly pegged one to one with the US dollar. USDT is reportedly backed by various assets like fiat currency as well as U.S. Treasuries so that it remains 1-to-1 redeemable with the USD.
Stablecoins are frequently used by cryptocurrency traders in order to easily move in and out of various crypto-assets without having to convert their funds into fiat currencies.
During the past few years, stablecoin issuers have been widely criticized for not maintaining adequate transparency with regards to the kinds of assets they are keeping in their reserve to fully back their virtual currency.
Tether has reportedly held commercial paper, or short-term, unsecured debt that’s issued by firms. However, Tether did not confirm the type of companies or even their location so it cannot be known where the firm actually acquired the debt from.
Tether claims it has sold its commercial holdings and has moved into US Treasurys, which are generally considered a more reliable asset. The firm releases “attestations,” which are meant to serve as reports issued by an auditor in order to attest to the firm’s reserves and the assets it maintains.
The latest report Tether published covering the December quarter revealed it had more assets than outstanding liabilities.
Tether reported last month that it recorded around $700 million in total profits in the latest December quarter. Tether’s total assets once liabilities are substracted come to about $960.6 million.
Paolo Ardoino, Tether’s CTO, noted that the firm estimates that the excess reserves will increase by $700 million in the present quarter, which has not yet concluded. That should take the firm’s excess reserves to about $1.66 billion. Notably, it may be the very first time Tether surpasses the $1 billion mark.
“So this money stays in Tether in the main company in order to further capitalize the stablecoin.”
Tether makes returns from charging different types of fees, like a $1,000 withdrawal fee (with a minimum withdrawal of $100,000); from various investments in crypto-tokens as well as precious metals; and from providing loans to firms.
It’s worth noting that the value of the outstanding USDT in circulation has increased significantly in March from $70.98 billion on March 1 to $78.14 billion as of yesterday.
That’s due at least in part to the recent demise of Silicon Valley Bank.
Circle, which issues the stablecoin USDC, recently stated that it had $3.3 billion exposure to SVB.
USDC then lost its US dollar peg as traders worried about the stablecoin’s stability. Traders had then decided to use Tether (USDT). Following the US government intervening to guarantee depositors, USDC was able to gain back its peg after the firm revealed that the $3.3 billion USDC reserve deposit at SVB would become available to investors and depositors.
When questioned about whether Tether could handle an event such as the SVB collapse, Ardoino wondered why people were still questioning its reserves after major lenders collapsed.
“First of all, seriously after Credit Suisse and all the others, all the banks that are failing you are looking again at Tether?”
Ardoino’s statements came as a reference to the recent instability at Credit Suisse, which resulted in a $3.2 billion deal for UBS to acquire the lender.
“Tether is making money and banks are failing. So if you have to put money somewhere, I guess that Tether is the most safe among all the choices.”