Tether reports $1.5 billion Q3 profit as its reserve buffer nears $8 billion

Tether, the company behind the largest stablecoin, says it earned $1.5 billion in the third quarter. Its cushion of assets above what it owes token holders has almost doubled, to about $8 billion.

What happened

In its latest quarterly figures, Tether reported excess reserves of roughly $8 billion, close to twice the previous level. The bitcoin it holds was valued at $8.37 billion at the end of September. The company’s holdings of US Treasury bills are now comparable in size to those of major foreign holders of US government debt.

Background

Tether issues USDT, a token designed to stay worth one US dollar. Each token is meant to be backed by reserves, most of them short-term US government debt. When interest rates are above zero, the income from those Treasuries goes to Tether rather than to token holders, which is why the company can be so profitable. Excess reserves are the assets Tether holds beyond the value of all USDT in circulation, a buffer meant to absorb losses.

Why it matters

A bigger buffer makes USDT more resilient if some reserve assets lose value, and that matters for a token used on exchanges and in trading pairs around the world. At the same time, bitcoin is far more volatile than Treasuries, so part of the cushion could shrink quickly in a falling market. The scale of Tether’s Treasury holdings also shows how closely the stablecoin business is now tied to the market for US government debt.