Tether To Invest 15% Of Its Net Monthly Profits in Bitcoin

Tether, the firm behind the world’s largest stablecoin USDT, has revealed plans to allocate 15% of its net monthly profits towards purchasing Bitcoin.

On Wednesday, May 17, the company stated that it would henceforth “focus exclusively” on investing in Bitcoin with actual profits from its business operations only, without regard to unrealized capital gains generated by price increases. This means that Tether will focus on the actual gains it has achieved, which is the difference between the purchase price and the amount received from selling an investment.

“Starting this month, Tether will regularly allocate up to 15% of its net realized operating profits towards purchasing Bitcoin. These Bitcoin shall be considered on top of the minimum reserve’s assets that 100% back tether tokens.” The firm tweeted Wednesday, May 17.

In a separate note, Paolo Ardoino, Tether’s chief technology officer, elaborated on Tether’s choice of Bitcoin, stating, “Bitcoin is the epitome of a sound and secure monetary system with its decentralized nature and scarcity.”

Recognizing Bitcoin’s revolutionary potential, he further acknowledged its ability to challenge traditional finance and redefine the concept of money, adding that the cryptocurrency has “defied expectations, shattered boundaries, and provides access to the global financial system to anyone with an internet connection.”

Tether Excessive Reserve Holdings.

According to the statement, Tether currently holds over $2.5 Billion worth of assets in company-owned “excess reserves”. It’s important to note that these excess reserves represent additional funds beyond the 100% reserves required to back Tether’s stablecoin. 

The accumulation of these reserves is a result of interest earned from a vast portfolio of investments, including US Treasury bills and other assets like gold. Tether’s strategy to keep excess reserves in its portfolio is driven by its need to keep its stablecoin products as resilient as possible.

Tether’s total Bitcoin holdings amount to approximately $1.5 billion, representing approximately 1.8% of its total reserves, which sat around $81.8 billion at the close of the first quarter. On the other hand, about 4% or $3.2 billion of those reserves are in gold.

That said, Tether’s decision to invest 15% of its monthly profits in Bitcoin demonstrates its growing confidence in the cryptocurrency’s benefits, including its ability to serve as a hedge against inflation.

This decision also coincides with the company’s efforts to significantly reduce its reliance on bank deposits and mitigate counterparty risks associated with recent bank failures in the US. Last quarter, Tether successfully reduced its bank deposits from $5.3 billion to $4.31 million.