Hmm. Who do they hold it through? USDC are using Blackrock as an intermediary, but Tether have always been very opaque about their actual structure. And who are all these people who have swapped cash for a non-cash token which does NOT bear interest, unlike the bonds?
As Matt Levine has said multiple times in "Money Stuff", Tether has found the perfect business plan. They hold billions of actual USD, and get to keep all of the interest for themselves.
Cash doesn't earn interest. T-bills and money market funds earn minimal interest compared to equities. Given the size of their holdings, Tether is paying a huge opportunity cost for their position. I don't consider that good business.
They have guaranteed returns on $185b of other people's money, and they only owe the other people the principal. That's like... the best business in the world? If it was all in 6m 2.8% treasuries they'd still be making $5.2b year for holding people's cash and running a token on the blockchain.
How greedy do you have to be to look at that and say "yeah, well they could be getting bigger returns with an actively managed portfolio?"
I'm pretty sure Tether was holding less cash than they said multiple times, and at multiple points it was just a house of cards where they were inflating the price of BTC on their own, but I'm also guessing by now they've had made enough to cover.
Said another way, returns ALWAYS have to be risk adjusted. Sure they could _probably_ make more in Equities, but their approach is returns with zero risk, which is impossible to beat.
Depends if the purchasing power of the currency holds up. Real returns are what matter, and earning 3% “risk free” is not so “risk free” if the price of things you want to buy increase by more than 3%, etc.
The problem is liquidity. If in some fantasy situation there was a run on tether, tether would go to 0 because their investments can't be converted into USD without tanking the price of those investments
Luckily for the crypto people, Tether makes it near impossible to turn their fantasy money into real money
Tether could gate redemptions at a pace that would preserve value of the underlying sovereign debt requiring liquidation, due to no immediate redemption regulatory requirements. Take a number and wait your turn while the treasuries are sold into the market, essentially.
Uh, internet dude, you must be new to finance. Banks have been doing this for centuries. Best business in the world? Sure. But it's even better when you invest in things that earn more, right? Like equities. That's what banks do. It's about the rate of return. Is it more risky? Sure. That's why they hold a diverse basket of goods, to diffuse the risk. But it's worth the risk when weighed against the opportunity cost of not investing and losing that rate of return.
> How greedy do you have to be to look at that and say "yeah, well they could be getting bigger returns with an actively managed portfolio?"
This is banking and finance. Greed only stops when you run into legislative limits, and sometimes, not even there.
Yeah, and we used to separate the investing activities of banks from the depository activities, to reduce overall risk to the financial system. You don't want people investing in higher risk securities with money that is supposed to be available on demand.
The business is good because of the high amount of leverage they have in those T-bills and money markets since those deposits are liabilities on the balance sheet. The actual return they make on the money the owners put into the business is probably great.
Based on the Q2 2025 attestation [1] it looks like they have about 162B in assets and 157B in liabilities which leaves ~5B in shareholder equity. Even if they hold most of those assets in treasuries, they probably have an egregiously high return on shareholder equity.
(Fun fact: I think this puts their leverage ratio as high as banks during the 2008 GFC. But treasuries should theoretically be safer than subprime mortgage loans).
Equities would give a higher return on average, they don't really work when the liabilities can get called at any time. Tether has to be able to produce money for people exchanging their tether.
If you were in their position and I gave you 150 billion dollars on the condition that I can withdraw that 150 billion dollars at any time. You'd probably also park it in a short-term money market fund. If you put it in equities and it dropped 1%, you'd be on the hook for 1.5 billion.
Just that the condition is that you give them 150b and if you withdraw and they Dont have you lost 150b and nothing will happen. Good luck recovering your cash from El Salvador or bvi.
People are giving them money for free. They pay absolutely zero interest or dividend to "investors". For the crypto people, Tether's job is to accept money and do nothing with it.
US debt is about as stable as the dollar itself, so to their crypto customers buying bonds is a no-op. Any yield is pure profit for Tether itself.
They can't ethically put the money into equities because they are obliged to redeem the tether tokens for USD on demand. It's the same thing that your bank manage can't take the cash in your account, bet it on nvda and take the profits if it goes up, unless they want to end up like SBF.
They may have somewhat sketchily put money into bitcoin at times though.
If you believe their attestations, they pretty much are. See, for example, https://assets.ctfassets.net/vyse88cgwfbl/2SGAAXnsb1wKByIzkh.... Most of the money is in Treasuries, or markets like overnight repos that behave much like Treasuries. Most of the rest is in things like corporate bonds, which again generally move like cash. Only their claimed excess equity is in riskier investments, like Bitcoin.
If you doubt their attestation, it is more reasonable to doubt their claimed total assets before worrying about the breakdown of their investments.
I don't think it has dawned on the HN crowd how insatiable the demand for dollars across the world is. This stuff is being used in all corners of the world, and accelerating.
There are plenty of people in jurisdictions where it is difficult to get dollars that use them for other things. Normal transactions, gambling, saving in USD. Not uncommon.
its just like your brokerage account, imagine if Schwab issued a stablecoin for every deposit someone made and only delete some of that stablecoin when they redeem
you'll find that people deposit and trade, they keep their balances there their entire life and beyond. when they trade, they are selling the stablecoin to someone else, someone else could redeem but they aren't either. stablecoins are liquid and useful, they have passive income capabilities while holding your principle value
so for Schwab's reporting, the balances always increase as people deposit more whenever they get their paycheck
this is what you're seeing with Tether, and all other leading stablecoins, as they grow at the same pace as they capture the same market
when actual traditional finance brokerage firms start issuing stablecoins, you'll see the same thing, the stablecoin just offers transparent real time behavior into their customer deposits
the only time stablecoin balances go down, and subsequently treasuries are offloaded behind the scenes, is when someone redeems a stablecoin for fiat currency. this isn't necessary, people don't want fiat or don't need to get fiat by redeeming it
I think the the market for those stablecoins is now broader than criminal and traders.
There is a huge demand for dollars by individuals outside of the US. Countries where people do not really trust their banks and currencies.
Even in the Euro zone, most saving accounts will give you about 1% after taxes. So why not going with USDT, USDC or EURC and get about 5% on a relatively safe lending platform.
There are many ways, the most common is to lend your stablecoins against collateral crypto. So if you put 1000 USD in the lending pool you have let's say the guarantee 2500 USD worth of bitcoin are serving as collateral.
That will get you about 5% on a serious protocol.
You can also provide liquidity on a stable stablecoin/stablecoin pair on a reputable decentralized exchange and get some of the fees.
There are surely many other "safe" ways.
If you live in Switzerland you're probably not gonna bother but it is more transparent and safer than than what a lot of people have access to around the world.
I know the DAI stablecoin was already very popular as a saving account in Argentina around 2018-2019.
NPR Planet Money has a podcast from last week speaking about hedge funds buying US treasuries. They touch on the chaos that can come from hedge funds buying treasuries and suggest that hedge funds might be lumped into the too big to fail group.
It's incredible how this comment got a bunch of replies not understanding the question.
Explanation: Tether is not holding a stack of paper bonds in a safe. They must use some broker (or similar) to operate and hold the treasuries for them. And they are hiding how this is working. So the parent's question is who do they (Tether) hold it (treasuries) through (as in what broker/investment bank/whatever).
My answer is nobody outside Tether knows. And they are one of the dodgiest companies out there. We are totally audited, bro, trust me. They could be doing leveraged investments. Or they could just be Madoff 2.0. Nobody really knows. And the US government seems to be looking the other way because they are desperate for any buyers of treasuries.
Exactly. I got this pointed out by one of the old school finance guys I've followed for years on Twitter/bsky; if you're a market participant of that size, other participants should expect to know who you are. If only because someone buying a billion dollars of bonds a week is useful to know if you want to unload some bonds.
USDC by contrast are open in their holdings, through Blackrock.
Large invisible "dark matter" financial holdings are the sort of thing that blow up badly during a financial crisis.
