Leading stablecoin issuer Tether, the company behind the USDT token, recently announced that it has amassed $2.5 billion in excess reserves and now plans to allocate 15% of its realized net operating profit to investments in the flagship -Use Bitcoin ($BTC) cryptocurrency. .
According to a recent announcement, Tether’s excess reserves currently represent about 3% additional value on top of the company’s at least 100% reserves used to back the stablecoins in circulation. Its reserves generate income through interest rates on the company’s extensive US Treasury bill portfolio and other investments, including gold.
According to this, Tether’s lead product, USDT, currently has $82.84 billion worth of tokens in circulation, each backed 1:1 by cash or short-term investments in the company’s reserves. Tether’s decision to maintain these excess reserves underscores its commitment to ensure the resilience of its stablecoin product, said CEO Paolo Ardoino.
Transparency is the top priority. @Tether_to has over $2.5 billion (equivalent) in proprietary excess reserves today.
What do company excess reserves mean?
This means that Tether currently has $2.5 billion (equivalent) more in addition to the 100% reserves required to secure the issued tokens. This account… https://t.co/LVXYh1EaOa pic.twitter.com/8O0YR6XbHj
— Paolo Ardoino 🍐 (@paoloardoino) May 17, 2023
Unlike traditional banks that operate on a fractional reserve basis, Tether primarily backs its cryptocurrencies with cash and short-term U.S. Treasury bills. At the time of writing, US Treasuries with maturity are yielding about 5.59%.
The latest certification dated March 31, 2023 shows that Tether holds around 2% of its portfolio in Bitcoin. The company has now announced its commitment to use up to 15% of its new monthly net operating income, which includes realized dollar gains on its T-Bills and similar investments, to purchase bitcoin as part of its excess reserves.
Currently, the total value of bitcoin in the Tether portfolio is well below its own excess reserves, at around $1.5 billion versus $2.5 billion. Ardoino stated that the company intends to continue this trend and only spend up to 15% of net operating income on continuous bitcoin purchases.
Ardoino cited Bitcoin’s unique qualities as the reason for Tether’s decision to invest in Bitcoin over other assets. He described Bitcoin as the epitome of a solid and secure monetary system, praising its decentralized nature and scarcity.
He also pointed out that Bitcoin is revolutionizing the concept of money and challenging traditional finance by allowing anyone with an internet connection to access the global financial system.
Last week, Tether reported net gains of $1.5 billion for the first quarter of the year, doubling its performance from the previous period of 2022. The company gave up its BTC allocations as well as allocations to physical gold, overnight repo Deals, etc. known corporate bonds with bullion holdings valued at $3.3 billion.
According to Tether, the lion’s share of its investments, roughly 85%, is held in cash, cash equivalents, and other short-term deposits. Gold and bitcoin account for about 4% and 2% of total reserves, respectively. It is worth noting that Tether also issues a gold-backed stablecoin called Tether Gold (XAUT).
photo credit
Featured image via Unsplash
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.