Tether to Spend Millions on Bitcoin to Diversify USDT Reserves

Tether International Ltd., the company behind the third-largest cryptocurrency by market value, will use 15% of its net investment profit, equivalent to $222 million of its first-quarter profit, on Bitcoin to diversify reserves backing its USDT stablecoin.

Tether was fined by U.S. regulators in 2021 for misrepresenting reserves backing its stablecoin meant to keep it at 1:1 to the U.S. dollar. The company, which said last week that its assets total $81.1 billion, said most of that was in the form of Treasury bills, and that 85% of its assets were "extremely liquid" in cash and cash equivalents. Gold and Bitcoin accounted for about 4% and 2% of Tether's total reserves, respectively.

Tether said it doesn't expect its Bitcoin holdings to exceed its share capital cushion—reserves in excess of the customer liabilities from Tether's token issuances.

Tether Reserve Transparency Debate Continues

The company was fined $41 million by the Commodities Futures Trading Commission (CFTC) and separately by the New York Attorney General two years ago for its handling of reserves. Critics say Tether has far to go before its reserves are regarded as transparent and confirmed.

"Tether’s fundamental business, the essence of everything Tether does, is tied exclusively to Tether’s financial reserves," former SEC attorney James Reed Stark tweeted last week. "Yet those reserves remain unaudited, unconfirmed and therefore dubious."

Stark's comments sparked a twitter debate between him Tether CTO Paolo Ardoino.

Tether's Bet on BTC Upside

Tether's bet on Bitcoin "aims to capitalize on the digital asset's potential growth" and it's not the only company to do so. Software company MicroStrategy (MSTR) has also been buying Bitcoin as an investment. At the end of the first quarter, MicroStrategy's Bitcoin stash swelled to 140,000, valued at about $4.2 billion.

Tether's new strategy could also underpin the price of Bitcoin into the end of the year, with analysts at Standard Chartered Bank saying the cryptocurrency may hit $100k by the end of 2024, CNBC reported. The collapse of SVB and mid-tier lenders have improved the outlook for BTC as a "trustless asset," while profits at crypto miners and the end of the Fed's tightening cycle would also help, said analyst Geoff Kendrick.