The number one stablecoin by market cap has announced that it will reach $1.6 billion in excess reserves of Tether (USDT). The company estimates this figure for the March quarter.
Tether Chief Technology Officer Paul Arduino disclosed that it expects approximately $700 million in profit at the time of said pushing for more reserves. Ardoino further stated that this money will remain in Tether to support the capitalization of USDT.
Tether expects to earn more revenue this Quarter
On CNBC report, Tether’s CTO announced that the company will generate $700 million in December 2022. According to the report, Tether’s assets exceeded its liabilities during the quarter. In particular, after deducting liabilities from assets, the company still has $960.6 million.
Speaking to CNBC, Ardoino stated that Tether’s excess reserves will record an additional $700 million this quarter. The figure is expected to push the reserve to $1.66 billion marking the first time it has reached a figure above $1 billion.
Regarding how Tether makes money, users pay a $1,000 withdrawal fee; the minimum amount a user can withdraw is $100,000. Second, Tether reportedly makes money by investing in precious materials and digital tokens. It also issues loans to many institutions, thus earning interest.
Moreover, the challenge USDC faced when the Silicon Valley Bank (SVB) crashed was also pushed up USD use Note that Circle announced it has $3.3 billion of USDC reserves stuck in SVB.
After the announcement, the USDC was de-pegged from the USD, causing panic and frenzy of selling among investors. Many USDC holders move their coins to USDT, the exchange is even below market value to reduce costs.
Losses in USDC and the banking crisis led Tether’s CTO to recommend USDT as a safer alternative. In Arduino’s words, stablecoins make money when traditional banks collapse.
According to CNBC’s Ryan Browne, Arduino was asked if Tether could withstand an event like the Silicon Valley bank crash. In response, He referred to the instability of Credit Suisse and other banks, asking whether people still question Tether reserves when recording massive gains.
A Brief On Stablecoin And Regulators
This new development is a great achievement for the USD-backed stablecoin, which means more user trust. Note that this asset class always faces regulatory scrutiny due to claims of a 1:1 peg ratio for fiat currencies such as USD or precious stones such as Gold.
However, the attention of regulators increased after the TerraUSD/UST crash in 2022. The stablecoin was supposed to be pegged to USD but had no cash in reserve to back it up. It just depends on another mechanism to keep the pegs. When it collapsed, investors lost billions of dollars.
After the UST crash, regulators ordered stablecoin issuers to more transparently disclose their reserve amounts and components to prove they have the same amount of USD as their coins in circulation.
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