Tether Pledges To Allocate Up To 15% Of Its Profits Into Bitcoin

The stablecoin issuer, Tether released its Q1 assurance report, in which it unveiled a $1.5 billion BTC reserve. As a part of its new investment strategy, Tether is planning to ramp up Bitcoin purchases. According to Tether’s CTO, Bitcoin has continually proven its resilience.

By Anna B Kiwanuka

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Tether is to start regular purchases of Bitcoin to bolster its excess reserves, the stablecoin issuer said in an announcement recently.

The company will allocate up to 15% of its net realized operating profits for buying up the world’s largest cryptocurrency, starting this month.

“Starting this month, Tether will regularly allocate up to 15% of its net realized operating profits towards purchasing Bitcoin (BTC). Tether anticipates that the current and future BTC holdings in its reserves will not exceed the Shareholder Capital Cushion and will further strengthen and diversify the reserves,” the stablecoin issuer said in its announcement.

The announcement further stated, “As reflected in Tether’s Q1 2023 Assurance Report, as of the end of March 2023, Tether already held approximately $1.5 billion in BTC in its reserves. While it is common practice among many institutional investors to have third-party custody of their Bitcoin, Tether believes in the philosophy “Not your keys, not your Bitcoin” and takes possession of the private keys associated with all of its Bitcoin holdings.”

According to Tether, under this new approach, the company will focus exclusively on utilizing realized profits from its investment strategy, disregarding unrealized capital gains generated by price increases. This means that Tether will consider only the tangible gains from its operations, which consist of the difference, between the purchase price and net proceeds from the sale or, in the case of a maturing investment, between the purchase price and the reimbursed amount.

Additionally, the company emphasizes that by incorporating Bitcoin into its investment strategy, it aims to capitalize on the digital asset’s potential growth, while leveraging its position as a trusted and reliable financial infrastructure provider. 

“Tether’s decision to allocate a portion of its net realized operating profits towards Bitcoin highlights the company’s confidence in the cryptocurrency market and its belief in supporting the broader ecosystem,” the stablecoin issuer also noted.

Paolo Ardoino, Tether’s CTO also commented on the company’s new move saying, “Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential. Its limited supply, decentralized nature, and widespread adoption have positioned Bitcoin as a favored choice among institutional and retail investors alike.”

He also mentioned on Twitter that the company has accrued $2.5bn in excess reserves on top of the 100% reserves that back-issued tokens. This is a result of interest rates on U.S. Treasury bills and other investments such as gold.

In its most recent financial update, Tether boasted of tremendous success as it said net profits had hit $1.48 billion in the first quarter, while reserves are at an all-time high.

But the company was recently hit by accusations that its reserve claims are dubious, with former Securities and Exchange Commission enforcement attorney John Reed Stark arguing that the firm’s regular unaudited attestations are meaningless.

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