Tether Reports $3.3 Billion in Surplus Reserves: Second Quarter 2023 Update

Tether, the largest stablecoin issuer globally, published an assurance report on Monday detailing its financial status as of June 30.

The Q2 attestation revealed that the issuer currently possesses over $3.3 billion in surplus reserves to support its USDT tokens.

Tether’s Significant Surplus

As outlined by Tether in a related blog post, the issuer’s surplus reserves arise from the earnings produced by its existing reserves. These earnings are not allocated to shareholders and are instead utilized exclusively as insurance to support its tokens.

USDT is intended to maintain a 1:1 value with the U.S. dollar and is always redeemable for dollars within the company’s reserves.

“Tether is once again showcasing its dedication to transparency by revealing its direct and indirect exposure (through Money Market Funds) to U.S. Treasury bills, as well as the Treasuries that collateralize the Overnight Repo,” the company noted. “When combined, the total amount of Treasuries backing Tether’s stablecoins is approximately $72.5 billion.”

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Tether reported a net profit of $1.5 billion in Q1, followed by over $1 billion from April to June. Of its Q2 profit, $115 million was allocated for share buybacks, while the remaining funds were added to the company’s surplus reserves.

Tether’s consolidated total assets reached $86.5 billion as of June 30, compared to $83.2 billion in liabilities, of which $83.17 billion “pertain to digital tokens issued.” This results in Tether having a nearly 4% surplus, addressing earlier concerns that the firm’s reserves were perilously close to insolvency.

According to Tether CTO Paolo Ardoino, Tether aims for its dependable reserves to serve as a “counterbalance” to recent banking failures, which were caused by fractional reserve lending and duration mismatches.

Any Bitcoin?

In Q1, Tether revealed that 2% of its reserves were held in Bitcoin (BTC), marking a departure from the previous trend of stablecoin issuers relying solely on U.S. government debt for profits.

Alongside Tether, competitor Circle – the issuer of USDC – exclusively generates profits through government debt, with the rest of its reserves maintained in cash.

Tether’s most recent report indicated that 85% of its assets are in “cash and cash equivalents,” rendering its reserves “extremely liquid.”

While updates on the company’s Bitcoin holdings were not provided, Tether CTO Paolo Ardoino clarified that a relatively small fraction of Tether’s profits is invested in the Bitcoin mining sector.

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