Tether, one of the most popular stablecoins, has recently made headlines. While the company's revenue is rising, it faces some challenges.
One of these is the ongoing debate over its use of secured loans. This raises lots of questions about Tether's transparency and true financial nature.
In Tether Holdings' recent quarterly report, most tether assets are U.S. Treasury bills and efficiently convertible assets.
A whopping $55.8 billion comes from Treasury bills. They also have over $3.3 billion in precious metals and around $1.7 billion in bitcoin.
It seems that Tether's claimed profits are primarily driven by increasing rates on its U.S. treasury holdings. The company claims to have $56.6 billion in U.S. treasury exposure, which has helped it shift its secured loans into a category called 'excess reserves.'
While Tether seems to believe these excess reserves are not part of the company's reserves, the name suggests otherwise.
Tether had previously claimed that it issues secured loans backed by liquid assets. However, their balance sheets don't reveal those assets, including whether they involve cryptocurrencies.
In the quarterly report, 6.36% of tether reserves consist of secured loans, which aren't linked to affiliated entities.
News reports indicate that tether reserves receive almost $1 billion quarterly returns. While plans to address the challenges faced by the company are still in process, Tether remains committed to improving transparency and providing real-time reserve data in the coming years. To cater to the rapidly growing use of USDT in Brazil, Tether has announced plans to introduce real-time audit reports by 2024.
As of December last year, Tether promised to eliminate all its secured loans by the end of 2023.
Apart from managing these extensive secured loans, Tether has been engaged in various investments. These include energy, artificial intelligence, staking, mining, and more.
Tether explains that these investments are not included in the reserves supporting the issued token.
By issuing USDT and other digital currencies backed by real-world currencies and gold, the company has achieved a total market cap of $84 billion, making it a prominent stablecoin. With this expansion, Tether has decreased its secured loans to $5.2 billion, marking a reduction of $330 million compared to the previous quarter.
Tether's new CEO, Paolo Ardoino, shared on Twitter that 85.7% of Tether's reserves, approximately $1 billion, are in cash and cash equivalents. These reserves include $56.6 billion in short-term U.S.
Treasury bills, $8.8 billion in reverse repurchase agreements linked to these bills, and $8.2 billion in U.S. Money Market funds valued at about $1 each. Tether also has $292 million in cash and bank deposits, along with $65 million in non-U.S. treasury bills.