Tether’s Q2 2023 financial report shows significant gains from US government bonds after the Fed’s rate increase.
The USDT stablecoin financial report for the second quarter of 2023 was published by Tether yesterday. Tether’s investments in US government bonds have started to yield significantly more than usual ever since the Fed increased interest rates to record high levels. Even after accounting for inflation, any additional gain is essentially a profit for the corporation as the main goal of USDT is to maintain reserves. The independent auditor BDO, one of the top five independent public accounting firms in the world, certified the legitimacy of this report by stating that it complies with the actual data.
Tether’s USDT stablecoin reserves
Tether was able to raise its surplus reserves by as much as $850 million to a total of $3.3 billion thanks to gains made throughout the quarter.
Excess reserves are those that are maintained out of pure caution rather than being used to cover the market value of the tokens issued.
This means that, in addition to the usual reserves that cover all of Tether’s tokens in circulation, as of June 30, the company additionally has $3.3 billion in surplus reserves that may be utilized to cover any unforeseen circumstances.
For instance, Tether’s major stablecoin rival USDC unexpectedly lost access to more than $3 billion in reserves in March when Silicon Valley Bank declared bankruptcy. As a result, USDC also lost full token coverage and the peg with the dollar.
When a portion of the reserves used to collateralize a stablecoin is lost for any reason—even one unconnected to the manager—excess reserves can be useful.
A similar issue occurred for Tether in 2018, when around $800 million was frozen as a result of the seizure of the assets of another bank where it had stored some reserves. It took months for the payments to be released, during which time USDT was no longer completely funded.
In order to create a sort of emergency treasury, the corporation has long resolved to place its net income into additional reserves.
The revenue of Tether
Tether reported overall operating profits of more than $1 billion for the time frame of April 2023 to June 2023 inclusive, an increase of 30% from the year’s first quarter.
The corporation was able to add another $850 million to extraordinary reserves that are exclusively used for contingencies as a result, increasing the total to roughly $3.3 billion, a 34% gain in a single quarter, net of profits returned to shareholders.
Reserves, on the other hand, continue to be collateralized by 100% of the market value of all active Tether-issued tokens.
It is important to remember that interest rates in the US were barely above zero at the beginning of last year. They had been raised above 2% by August 2022, and in November they had been hiked to 4%. They have even exceeded 5% since March 2023, and in July they were upped to 5.5%.
As of June 30, 2023, Tether’s reserves appeared to consist of around $56 billion in US Treasury Bills, or US government bonds, and almost $9 billion in Overnight Reverse Repurchase Agreements. It earns interest revenue on these deposits, and over the past few months, partly as a result of the rise in interest rates, this income has increased.
It is more than natural that at such figures and with such high interest rates the company’s earnings are plenty given that the total quantity of Treasury securities supporting Tether’s stablecoins is approximately $72.5 billion.
However, 85% of its investments are kept in cash or cash equivalents so they are always on hand in case of emergency.
In the end
Due to all of this, Tether had over $86.5 billion in assets as of 30 June 2023, but only $83.2 billion in liabilities, 83,178,020,411 of which were issued digital tokens.
As a result, the Tether group’s consolidated assets were greater than its consolidated liabilities.
Paolo Ardoino, CTO of Tether, stated:
I am immensely proud of our most recent reserves attestation, reaffirming our unwavering commitment to transparency. Transparency is not just a buzzword for us; it is the cornerstone of our philosophy.
We believe that open communication and strong financials foster trust and reliability, and this is what the global community deserves especially in a year devastated by many failures across the banking and crypto industry. Our long-term goal has always been to drive innovation as a global player, pushing the boundaries of tech and imagination.
By continuously improving our reserves attestation process, we aim to set new standards in the industry and inspire others to follow suit. As we move forward, we remain dedicated to embracing accountability, enhancing risk management and security, leading by example.
With a firm focus on transparency, we aim to shape a future where every participant in the global financial ecosystem can confidently navigate a realm built on trust and innovation.
That’s why in this quarter, Tether’s USD₮ token in circulation surpassed its previous all-time high.