The latest news from Tether is that the company behind the market-leading USDT stablecoin is looking to allocate a portion of its profits to buy Bitcoin, as the objective is to diversify the reserves of the largest stablecoin in the market.
The “investment strategy is aimed at further strengthening its reserve portfolio,” Tether said in a press release issued Wednesday and announced that the process of Bitcoin purchases will begin this month.
According to Tether, this change in strategy is part of its conservative and prudent approach to investment decisions aimed at strengthening, growing, and diversifying its reserves. By implementing this framework, Tether aims to increase transparency and provide a clearer view of the company’s performance and its capital allocation strategy,” they add.
On its Twitter account on May 17th,Tether published this note “Starting this month, Tether will regularly allocate up to 15% of its net realized operating profits towards purchasing Bitcoin. These Bitcoin shall be considered on top of the minimum reserves assets that 100% back tether tokens.” Source. @Tether_to
Tether Seeks to Diversify and Strengthen its Reserves
Tether’s reserves included USD 1.5 billion in BTC as of March this year, and the new purchases aim to strengthen and diversify these reserves.
Tether announced in October 2022 that it had reduced the commercial role of its reserves to zero. Instead, it increased investments in US Treasury bills to ensure that the 1:1 backing of USDT to USD had the safest reserves.
According to its calculations, the company expects that the current and future holdings of BTC in its reserves will not exceed the accumulated shareholders’ equity. According to company transparency documents, as of the end of March 2023, Tether already had approximately $3.4 billion in gold in its reserves.
Paolo Ardoino, Tether’s CTO, noted in a statement that the decision to invest in BTC was due to the strength and potential of the benchmark cryptocurrency as an investment asset.
He pointed to Bitcoin’s resilience and the fact that “digital gold” is now seen as a long-term store of value. Beyond that, it has shown significant growth potential, with fundamental factors such as limited supply, decentralized nature, and widespread adoption positioning it as an investment asset of choice for a growing number of institutional and retail investors.
Ardoino commented about Tether’s BTC move that this has to do with investing in Bitcoin is not only a way to enhance our portfolio performance, but also a method to align ourselves with a transformative technology that has the potential to reshape the way we do business and live our lives.
Although the company will allocate up to 15% of its earnings to regular BTC purchases, total Bitcoin holdings in USDT reserves will not grow to exceed the stablecoin issuers’ shareholder capital cushion. Tether will also not have custody of its Bitcoin with any external but takes control of its holdings as part of the “Not your keys, not your Bitcoin” philosophy.
Tether posted a net profit of $1.48 billion in the first quarter of the year; double that of the same period last year. USDT’s market capitalization now exceeds $82.8 billion.
By Marina Meza
