Stablecoins Are Big Business: Tether Profits $700M in 3 Months

As major crypto companies bleed cash through the bear market, stablecoins such as tether (USDT) have apparently emerged as incredibly profitable.

Tether, issuer of the largest stablecoin by circulating supply, has reported generating more than $700 million in profit last quarter alone.

The details were shared alongside its latest attestation report by international accounting firm BDO, which provides a snapshot of what Tether says were its assets and liabilities as of Dec. 31.

Tether’s assets — almost all of which were related to backing USDT — amounted to more than $67 billion. Its consolidated liabilities, representing USDT’s supply, were $66 billion.

Excess reserves amounted to at least $960 million, which would mean USDT was fully backed at the particular moment the snapshot was taken.

(Note: attestations like these, despite being described as “independent auditor’s reports,” are not the same as audits. To date, no traditional audit has been completed on any stablecoin, including tether.)

Per the attestation, 82% of what backs USDT was: $39.2 billion in US Treasurys, $7 billion in money market funds, $5 billion in cash and bank deposits, $3 billion in reverse repurchase agreements and nearly $94 million in non-US Treasurys.

Tether’s remaining 18% was split between corporate bonds, funds and precious metals ($3.4 billion), other investments ($2.7 billion) and secured loans ($5.8 billion). 

The biggest differences from Tether’s previous attestation were a near-50% reduction in non-US Treasurys, a 13% drop in cash and bank deposits and a 5% reduction in secured loans.

No further information was given for Tether’s “other investments,” although previous attestations have disclosed some of those being digital assets. Loan counterparties have also not been disclosed.

Tether has also moved away from holding commercial paper (short-term corporate debt) and certificates of deposits entirely. In March 2021, commercial paper made up half of tether’s backing, now they’re zero, while US Treasurys amounted to just $910 million (2.23%).

“After a tumultuous end to 2022, Tether has once again proven its stability, its resilience and its ability to handle bear markets and black swan events, setting itself apart from the bad actors of the industry,” Paolo Ardoino, CTO of Tether said in a statement. 

Ardoino added, “Not only were we able to smoothly execute over $21 billion dollars in redemptions during the chaotic events of the year, but Tether has on the other side issued over $10 billion of USDT, an indication of continued organic growth and adoption of Tether.”

Details of exactly where Tether’s $700 million in profit came from were not disclosed. The funds have been added to Tether’s reserves, the firm said in a blog post.

Tether and other stablecoins still without audit

Stablecoins are a type of cryptocurrency pegged to the value of an asset — usually the US dollar or gold, designed to be a currency that can withstand market fluctuations. 

They also play an important role in decentralized financial (DeFi) markets, often used as collateral for borrowing and lending. 

Centralized stablecoins, such as tether and USDC (a cryptocurrency issued by Circle) are collateralized off-chain, making tracking asset backing difficult and reliant on third parties.

Quarterly reports like the ones Tether publishes show that a financial services firm has signed off on balances at a particular moment.

Audits, on the other hand, extensively vet internal operations and financial controls to reveal undisclosed or unknown risks, determining overall fiscal standing across a longer period of time.

Tether has repeatedly promised an audit but one has never eventuated. Circle publishes similar attestations in lieu of a real audit, as does Paxos, the issuer of Binance’s branded stablecoin binance USD. 

Crypto exchanges and lenders began offering attestions as “proof of reserves” following the FTX scandal, but firms completing those reports have since stopped servicing the sector (Binance previously said the “Big Four” auditing firms have refused to audit the exchange).

Tether was ordered to provide quarterly attestations as part of its settlement with the New York Attorney General’s office in Feb. 2021, after an investigation found Tether had not always backed USDT with equivalent assets.

By contrast, decentralized stablecoins such as MakerDAO’s DAI are completely transparent and non-custodial, meaning anyone can see exactly which assets back the token at all times — not just at momentary snapshots in time.

---

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
• Empire: Start your morning with the top news and analysis to inform your day in crypto.
• Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
• 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
• Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
• The Drop: For crypto collectors and traders, covering apps, games, memes and more.
• Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.