Washington Has $114 Billion Reasons to Keep Tether Close

Not long ago, Washington fined Tether for misleading the public about the dollars backing its tokens. Today, the company’s insatiable appetite for American debt has become the primary argument for expanding the global reach of its tokens.

The shift between these two positions reveals much about the current state of cryptocurrency. Tether built a business by providing access to dollars through markets and wallets outside the conventional banking system. As the largest stablecoin issuer, it invested much of the capital backing this business into U.S. government debt. Once operating on the fringes of America’s financial establishment, the company has now become one of the largest and most reliable customers of the U.S. government, possessing a distribution network that the state has strong incentives to support.

On September 23, Bloomberg reported that the Trump administration was considering an overseas stablecoin initiative, which could include joint ventures with private companies. The U.S. Treasury and State Department could participate, along with the U.S. International Development Finance Corporation (DFC). The goal is to extend the use of the dollar and support demand for U.S. Treasuries.

The report does not confirm a deal with Tether, nor has the initiative been announced as an operating program. However, Tether is central to understanding why such a proposal would appeal to Washington. According to the company, USDT represented more than 60% of the stablecoin market at the end of June. Its latest reserve report listed $114.96 billion in directly held U.S. Treasury bills.

This makes Tether a leading private distributor of digital dollars and a major customer for short-term American debt. While the dollar’s global position still rests on a much larger financial system, Tether’s specific contribution is extending that system to individuals who can purchase a token more easily than they can open a traditional American bank account.

This reach gives the company significant political value. The assets that lend credibility to its token also give Washington leverage over the business. Both sides have something the other desires, while the users of USDT have relatively little say in the terms.

The reserve portfolio as a political asset

In October 2021, the Commodity Futures Trading Commission (CFTC) ordered Tether to pay $41 million for misleading representations about its backing. The order covered claims made between 2016 and 2019 that USDT was fully backed by corresponding fiat currency held in bank accounts. The regulator found that Tether held other assets and relied on arrangements that did not match those representations.

Subsequently, Tether’s reserves took a different form. In October 2022, the company announced it had eliminated commercial paper—short-term debt issued by corporations—and replaced those investments with U.S. Treasury bills. This move toward highly liquid government debt addressed a fundamental financial issue: users expect to be able to exchange their dollar tokens for dollars, especially when confidence in the crypto market wavers.

This portfolio decision also made Tether more appealing to American policymakers. Every business seeks dependable customers. The U.S. government issues debt, and Tether had become a very large customer with at least $100 billion worth of incentives to continue its purchases.

Tether’s reserve report listed total reserve assets at $187.75 billion and liabilities at $183.64 billion as of June 30, leaving $4.11 billion above liabilities. Its directly held Treasury bills had a weighted average maturity of less than 90 days. The report also listed $18.63 billion in overnight reverse repo agreements, transactions in which Tether lends cash against collateral.

These positions should not be combined and presented as identical Treasury ownership. However, they demonstrate how deeply Tether’s reserve management depends on short-term dollar finance. USDT can move between wallets at any hour, yet much of the value supporting it comes from conventional financial contracts.

The reserves also include other assets. The report lists $18.84 billion in precious metals, $5.80 billion in Bitcoin, and $13.45 billion in secured loans. While it is true that Tether is a major Treasury holder, treating its entire reserve as a 1:1 portfolio of Treasury bills would be inaccurate.

Tether’s reporting of its reserves has also evolved. On August 13, the company announced that KPMG US had completed an audit of its 2025 financial statements, issuing an unqualified opinion. This means the auditor accepted that the financial statements fairly presented the company’s finances under the accounting standards used. This marks a significant departure from the years when the absence of a financial-statement audit dominated almost every argument regarding Tether.

While neither of these documents gives Washington a reason to treat USDT as a government obligation, they help explain how a company once defined by disputes over its reserves can now present itself as an established financial counterparty.

The economics here are straightforward. When customers supply dollars for newly issued USDT, Tether assumes a redemption obligation and holds assets against it. Treasury bills generate a return, but USDT itself does not give its holder a contractual share of that return. Tether reported approximately $1.50 billion in second-quarter net operating profit, driven primarily by Treasury and repo income.

CryptoSlate has previously examined who owns Tether’s Treasury portfolio. The company owns the reserves, while users hold tokens whose value depends on the company’s ability to honor its obligations. The political implication is significant: Tether can convert demand for accessible dollars into both private earnings and financing for the country issuing those dollars.

Washington receives a debt buyer without having to operate the retail service; Tether earns income from assets that also support confidence in its product; and the user receives a dollar-denominated balance that can travel through markets they can actually access.

There are, of course, limits to the debt argument. Treasury purchases do not retire the national debt, and buying short-dated bills does not commit Tether to financing the government for decades. Its portfolio must serve people who may want their money back. It is a large, recurring buyer whose decisions depend on the condition of its own business.

However, Tether’s real value to Washington extends beyond the size of its current portfolio. Many institutions can buy Treasury bills. Tether has built a mechanism to gather dollar demand from people who might never become customers of traditional institutions.

The customer Washington cannot easily reach

Consider a shop owner who wants to keep part of the week’s earnings in dollars. Depending on their location, opening an overseas bank account could be impossible, and holding physical cash in dollars can be cumbersome when it comes time to exchange it. Using USDT, on the other hand, is often the fastest and easiest option, especially for those who already own crypto or use digital services like exchanges. The widespread adoption of USDT means that the overwhelming majority of its users have little influence over American foreign policy.

Yet, the decision to use USDT still has consequences for American influence. Dollars become the unit in which savings are measured. Large, popular businesses that accept the stablecoin create further reasons for others to hold it. Familiarity, available trading partners, and places to exchange it for local currency all make USDT more attractive with repeated use.

This is why Tether’s customer base deserves more attention than a simple comparison of its portfolio with countries’ Treasury holdings. Favorable government policy can attract a new issuer, but it cannot instantly reproduce a network of dealers, exchanges, and users willing to accept the same token.

To fully understand how USDT works, we must look closely at its funding mechanism.

Buying existing USDT from another person does not automatically send new money to Tether or result in another Treasury purchase; it merely transfers a token already in circulation. Additional reserve assets become relevant only when demand leads to net new issuance. Payments volume and new funding for the U.S. government measure different things.

Nor does every dollar entering stablecoins represent fresh demand for American assets. Someone moving money from a dollar fund into USDT is simply rearranging existing dollar savings. Someone seeking dollar exposure for the first time, however, presents a completely different and much more lucrative opportunity.

Federal Reserve Governor Stephen Miran highlighted this point in a November 2025 speech on overseas stablecoin demand. He distinguished between transfers from existing dollar holdings and demand among foreign savers whose access to dollars is restricted. His argument was that this second group offers the larger opportunity.

This helps explain the overseas focus of the reported initiative. Persuading an American with a bank account and a Treasury fund to buy a digital dollar will merely reshuffle existing capital. However, making dollar balances accessible to someone previously excluded from them can extend the dollar’s reach.

Treasury Secretary Scott Bessent has already stated the policy objective. In his July 2025 statement on the GENIUS Act, he connected stablecoins with wider access to the dollar economy and increased demand for U.S. Treasuries. Washington’s interest in this outcome is explicit.

Government participation could facilitate access through financing or partnerships if a program is eventually established. The DFC’s existing financial products include loans, guarantees, and equity investments. These are different forms of support with different risks for the public. Nothing in the reported proposal specifies which instruments would be used for stablecoins or which companies would qualify.

The choice of institution fits the proposal. Overseas finance already combines commercial objectives with American foreign policy, and a dollar-token business can fit that logic without Washington issuing the token or managing its customers.

However, the people who most value an alternative to their local financial system may live in countries whose governments do not welcome another route into dollars. What looks like financial autonomy to a household can look like a loss of monetary control to its central bank.

The IMF has described how foreign-currency stablecoins can displace local money in savings and transactions where inflation, currency volatility, or weak institutional credibility makes alternatives attractive. This does not make the household’s choice irrational. People should not have to sacrifice their savings to help a government defend its currency. It does mean that Washington and the user can benefit from an arrangement that leaves the user’s government with less influence over domestic finance.

There is something distinctly American about letting a private company earn the distribution income while the currency’s issuer collects the geopolitical advantage. Tether has already built much of the business that an official overseas initiative would want to encourage. The next negotiation concerns how much freedom this earns the company and what Washington expects in return.

Washington wants the reach and the controls

Tether’s dependence on dollar finance makes the relationship work in both directions. Its reserve assets derive their value from American institutions, and its business requires financial counterparties and reliable access to markets where those assets can be held and sold. Operating an international token will not remove these dependencies.

There is also an enforcement relationship. In December 2023, Tether adopted a voluntary freezing policy tied to U.S. sanctions designations. The company can restrict tokens at specified addresses even when the person holding them controls the wallet’s private keys. Self-custody of a centrally issued token does not remove the issuer’s powers.

This type of cooperation continues to hold significant value for the U.S. In a September 9 announcement concerning alleged scam proceeds, the Justice Department described restraining $52 million and thanked Tether for its assistance. Recovering money linked to fraud is a legitimate public benefit. The same technical capacity also establishes that this supposedly borderless money has an identifiable company capable of acting on demands from authorities.

Washington can therefore want more people to use the product while also wanting stronger control over its issuer. Greater reach expands the relevance of the dollar; cooperation makes that reach more manageable for the state.

The GENIUS Act builds access conditions into the legal framework. Its foreign-issuer route includes a determination that an overseas regulatory regime is comparable, registration requirements, and compliance with lawful orders. Being foreign does not simply place an issuer beyond American conditions for entering American markets.

Implementation is still in progress. The Treasury’s August 17 proposed rule describes January 18, 2027, as the expected effective date of the act and July 18, 2028, for a further restriction on offers and sales to U.S. persons. The proposal also addresses foreign issuers’ ability and willingness to comply with lawful orders. Companies have time to prepare, but the direction is explicit: access to American customers will come with American conditions.

Tether has prepared for a more institutional business through a separate product. In January, it announced the launch of USA₮, issued by Anchorage Digital Bank, with Cantor Fitzgerald as the designated reserve custodian and preferred primary dealer. The issuer and token are distinct from offshore USDT. The announcement also states that USA₮ is neither government-guaranteed nor covered by federal deposit insurance.

This arrangement gives the group another way into American finance while USDT serves its international market. It also demonstrates how much institutional machinery a dollar token can contain, even when the transfer itself happens on a public blockchain.

This does not mean Tether gets to dictate the bargain. Washington’s objective is a larger dollar network, and several companies can help supply one. Supporting competing issuers could reduce dependence on Tether while advancing the same monetary goal. The company has a distribution advantage, but an administration promoting stablecoins has no inherent obligation to preserve its market share.

The uncomfortable prospect is that commercial scale becomes a reason to tolerate weaknesses that would be unacceptable in a smaller firm. Officials could come to view an issuer’s failures chiefly as threats to Treasury demand or overseas dollar access. This is a risk of the relationship, rather than evidence that an exemption or rescue has already been promised.

The protection against this would have to be specific. Public support should identify who receives funding, what losses the public could bear, and which obligations apply to the issuer. Reserve oversight and routes for contesting restrictions on funds should hold up even when enforcing them inconveniences a politically valuable company. Audits can provide financial assurance about a defined period; they cannot settle those choices about power.

Stablecoins were well suited to institutional adoption because their main promise was institutional from the beginning. Keeping a private token worth a dollar requires assets, counterparties, and an organization capable of honoring that promise. Once a company performing that role became large enough, interest from the government issuing the underlying currency was inevitable.

Tether’s success lies in making dollars accessible through channels people were willing to use. Washington now has reasons to help expand those channels and reasons to demand influence over them. Users can gain a meaningful escape from the limits of local finance while entering a different set of dependencies. The bargain can work for all three parties, but the state and the issuer will have far more power to write it.

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