Tether is the company behind the well-known stablecoin USDT, which holds $72.5 billion worth of U.S. Treasury bills, a fact initially disclosed in the company's Q2 2023 assurance report.
Paolo Ardoino, the Chief Technology Officer of Tether, emphasized this fact on social media platform X on September 5th.
According to Ardoino's post, Tether's $72.5 billion exposure to U.S. Treasury bonds makes the stablecoin operator the 22nd largest holder of these bonds, surpassing countries like the United Arab Emirates, Mexico, Australia, and Spain.
The Chief Technology Officer of Tether also praised the "high utility" of USDT in developing markets in his post, calling the stablecoin a "lifeline" for many citizens of countries facing "crazy" inflation rates.
However, Ardoino's post about Tether investing in US Treasury Bonds has sparked intense discussion among Crypto enthusiasts.
Matthew Dixon, CEO of Crypto asset rating platform Evai, expressed concern about this situation. Dixon believes that while Tether holding Treasury Bonds is reassuring, it is still "worrisome".
He emphasized the possibility of rising interest rates, which could lower the value of these bonds and lead to a "panic sell-off after the black swan event".
In the context, US Treasury Bonds are typically considered a safe investment, representing the short-term debt supported by the US Treasury Department.
Individuals or companies borrow money from the government for a fixed period of time (usually one year or less), and in return, the government issues Treasury Bonds to represent these loans.
Treasury Bonds are generally low-risk investments as they are repaid by the US government, but they are purchased at fixed interest rates. Therefore, if there is a rise in interest rates before the bonds mature, their market value will be impacted, making it difficult for companies to convert the bonds into cash to deal with the trouble.
Matthew Dixon believes that in the case of Tether, if such a situation arises, it may trigger market panic, causing users to convert their USDT into other crypto assets. In the worst case scenario, the peg between USDT and the US dollar may be affected.
Interestingly, Tether made significant progress in 2023.
In May, the company released its Q1 2023 assurance report, showing that its reserves increased by $1.48 billion, reaching $2.44 billion. In July, Tether disclosed in its Q2 assurance report that it had additional excess reserve earnings of $850 million, bringing the company's total reserves to $3.3 billion.
USDT stablecoin also gained a lot of attention in 2023, with its market share increasing by more than 25% in that year alone. According to CoinMarketCap, USDT is currently the largest stablecoin and the third largest crypto asset, with a market capitalization of $82.85 billion.
