Important news for the crypto company Tether, which says it has about $1.6 billion in excess reserves to support its USDT stablecoin. Speaking of which, Tether’s chief technology officer Paolo Ardoino believes USDT is becoming the safest asset to hold in the world during the banking crisis. Full details below.
Crypto news for Tether regarding its reserves
Crypto company Tether estimates it will make a $700 million profit in the March quarter, bringing its total excess reserves to more than $1 billion, the company’s chief technology officer told CNBC, revealing the latest data for the first time.
As we know, Tether issues the USDT stablecoin, which is pegged one-to-one with the US dollar. The USDT is backed by real-world assets such as fiat currency and U.S. Treasuries, meaning that it is always redeemable one-to-one with the US dollar.
Indeed, stablecoins are generally used by traders to enter and exit different cryptocurrencies without the need to convert money back into fiat currencies. However, over the years, stablecoin issuers have been criticized for not being transparent enough with the type of assets they hold in their reserve to back their digital currency.
Tether held commercial paper, or short-term unsecured debt issued by companies, but apparently did not disclose the type of companies or the geographic location of the companies from which it had contracted debt.
Eventually, Tether sold all its commercial holdings and moved into US Treasuries, which are considered a more stable and reliable asset. The company produces so-called attestations, which are reports produced by an auditor to attest to the company’s reserves and the assets it holds.
The last report released by Tether, covering the December quarter, showed that it had more assets than liabilities. Tether company then revealed in February that it had made a profit of $700 million in the December quarter. Company’s total assets once liabilities were subtracted amounted to $960.6 million.
Tether CTO’s statements on the latest crypto news
Paolo Ardoino, chief technology officer of Tether, said the company estimates that excess reserves will increase by $700 million in the current quarter, which has not yet ended.
This would bring Tether’s excess reserves to $1.66 billion and would also be the first time the company has crossed the $1 billion threshold. On this matter, Ardoino stated:
“So this money stays in Tether, the main company, to further capitalize the stablecoin.”
Tether generally makes money from various fees, such as the $1,000 withdrawal fee (with a minimum required withdrawal amount of $100,000), from investments in digital tokens and precious metals, and from issuing loans to other institutions.
In addition, Ardoino said that in the fourth quarter of 2022, Tether generated $700 million in profits:
“I don’t have the final data yet, but this quarter’s profit will probably correspond to the last quarter of 2022.”
Not only that, he also added that the crypto company owns an additional sum on top of that $950 million. Specifically, he pointed out the following:
“So, that means our company’s capital will grow to $1.5 billion or $1.7 billion that adds to the reserves that we have that back up 100% of the assets.”
The Tether executive went on to say that USDT is becoming the safest asset to hold in the world because the company is different from banks based on the fractional reserve model.
Not only that, Ardoino also specifically referred to the ongoing crisis in the US banking system, with banks such as Silicon Valley Bank (SVB) collapsing due to problems with the fractional reserve model. In this regard, he expressed his opinion by saying:
“I love Bitcoin and that’s our cover, and that’s why we’re into Bitcoin, because we don’t trust those guys who have taken so much risk on customer deposits.”
Tether and Circle compared after SVB’s collapse
As previously reported, last year Tether aggressively cut its commercial paper support, eventually reducing it to zero by the end of 2022. In addition to removing commercial paper from its reserves, Tether was replacing those investments with US Treasury bonds.
The news comes as Tether continues to increase its market dominance, with USDT’s market capitalization adding about $8 billion since 28 February, according to CoinGecko.
In any case, the value of all outstanding USDT has grown significantly this month, from $70.98 billion on 1 March to $78.14 billion on Thursday, according to CoinMarketCap.
However, Circle, which issues a rival stablecoin called USD Coin, faced big problems because of its exposure to the SVB collapse. With the USDC stablecoin briefly losing its 1:1 peg with the US dollar.
Subsequently, the stablecoin bounced back as Circle announced Cross River as its new banking partner and expanded ties with BNY Mellon. However, after the US government intervened to guarantee depositors, USDC regained its peg.
Specifically, its situation only recovered after it affirmed that the $3.3 billion USDC reserve deposit held at SVB will be fully available to people.
In contrast, Ardoino revealed Tether’s estimated profit for the current quarter defending the company’s record. Indeed, when asked whether Tether would be able to withstand an event like the SVB crisis, Ardoino asked why people still question its reserves even after the collapse of traditional lenders.
In addition, in reference to Credit Suisse’s instability, which eventually led to a $3.2 billion deal brokered by the regulator for UBS to buy the Swiss lender, Tether’s CTO said:
“Tether is making money and the banks are failing. So if you have to put money somewhere, I guess Tether is the safest of all the choices.”