Tether, a cryptocurrency startup, anticipates a $700 million profit for the March quarter, bringing its total excess reserves to over $1 billion, according to the company’s technology leader, who shared the most recent data with CNBC for the first time.
The USDT stablecoin is produced by Tether and is linked 1:1 to the US dollar. USDT is always 1:1 redeemable with the US dollar because it is backed by tangible assets like fiat money and US Treasury securities.
Trades between cryptocurrencies can be made using stablecoins without having to exchange funds back into fiat money.
Stablecoin issuers have come under fire over the years for not being open enough about the types of assets they keep in reserve to support their digital currency. Tether held commercial paper, which is a type of company-issued, short-term unsecured debt. Tether, however, remained mum regarding the nature of the businesses or the region from which they had acquired the loan.
After selling off all of its commercial holdings, Tether switched to investing in U.S. Government bonds, which are viewed as a more dependable and stable asset. The business generates so-called attestations, which are audit reports attesting to the company’s reserves and assets.
In its most recent report, which covered the December quarter, Tether stated that company had more assets than liabilities.
Nevertheless, in February, Tether disclosed that it had made a $700 million profit in the three months ending in December. After deducting liabilities, the company’s total assets come to $960.6 million.
Tether’s chief technical officer, Paolo Ardoino, stated that the business expects the excess reserves to rise by $700 million in the still-unfinished current quarter. Tether’s surplus reserves would then reach $1.66 billion. And Tether would be crossing the $1 billion threshold for the first time.
“So this money stays in Tether in the main company in order to further capitalize the stablecoin,” Ardoino said.
Tether generates revenue from a variety of sources, including a $1,000 withdrawal charge (with a $100,000 minimum withdrawal requirement), investments in digital tokens and precious metals, and lending money to other organizations.
According to CoinMarketCap, the total value of all the USDT in circulation increased significantly this month from $70.98 billion on March 1 to $78.14 billion on Thursday.
That’s owed in part to Silicon Valley Bank’s demise earlier this month. Circle, which publishes the Dollar Coin rival stablecoin, disclosed it had $3.3 billion exposure to SVB. Investors’ worries about the stability of the coin caused USDC to lose its dollar peg.
Tether attracted a lot of investors. The USDC regained its peg after the US government intervened to reassure depositors, announcing that the $3.3 billion USDC reserve deposit held at SVB will be completely accessible to citizens.
While defending Tether’s track record, Ardoino disclosed the anticipated earnings for the current quarter. Ardoino questioned why people were still doubting Tether’s reserves after traditional lenders failed when he questioned whether it could endure a situation like the SVB disaster.
“First of all, seriously after Credit Suisse and all the others, all the banks that are failing you are looking again at Tether?” Ardoino said in reference to the instability at Credit Suisse, which eventually led to a regulator-brokered $3.2 billion deal for UBS to buy the Swiss 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,” Ardoino said.
(Adapted from CNBC.com)