Tether to Purchase Bitcoin as Part of Reserves Strategy Shift

Tether Holdings Ltd., the operator of the largest stablecoin, will invest as much as 15% of profits on a regular basis in Bitcoin as part of a strategy to diversify its reserves.

(Bloomberg) — Tether Holdings Ltd., the operator of the largest stablecoin, will invest as much as 15% of profits on a regular basis in Bitcoin as part of a strategy to diversify its reserves.

Starting this month, all Bitcoin purchased will be considered as additional holdings on top of the minimum assets kept in reserve to back its USDT token and other stablecoins, the British Virgin Islands-based firm said in a statement. Stablecoins are digital tokens that aim to keep a one-to-one value with a less volatile asset like the dollar, typically by maintaining large reserves as segregated collateral.

Tether held around $1.5 billion of Bitcoin as part of the reserves backing its tokens at the end of March, according to a third-party attestation of its holdings. All Bitcoin will be stored and managed by Tether itself, it added, rather than using any custodial or banking partners that it presently partners with for other assets like cash and cash-equivalents.

The company said on Wednesday that it does not expect the value of its current and future Bitcoin holdings to exceed its shareholder capital cushion, referring to excess capital held by Tether to protect against heavy losses.

That figure now stands at more than $2.5 billion, Tether’s Chief Technology Officer Paolo Ardoino, said on Twitter. Only profits realized on that $2.5 billion excess would be used to purchase Bitcoin, he added, as a means of ensuring its total Bitcoin holdings stay below its overall capital cushion.

Tether held roughly $81.8 billion in reserve at the end of March, the attestation showed, with around 85%, or $69.3 billion, stored in cash and cash-equivalent assets like short-dated US Treasury bills. Rising yields on US government bonds has become a boon for large holders like Tether, with the current rate of 5.2% potentially netting the company around $2.8 billion in earnings on its $53 billion stockpile of bills.

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