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Accounting Firm BDO Confirms Tether’s $960 Million Excess Reserves

2 mins
Updated by Ryan James
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In Brief

  • Accounting firm BDO confirms that Tether's assets exceed its liabilities by $960 million.
  • The stablecoin issuer has also increased the percentage of its reserves held in Treasury bills to 58%
  • The concentration of Treasurys in stablecoin reserves has caused at least one academic to sound the alarm about possible contagion in traditional markets if issuers experience a bank run.
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Attestation firm BDO confirms that Tether has assets worth at least $67 billion and minimum surplus reserves of $960 million.

BDO’s “assurance opinion” confirms the validity of Tether’s December 2022 Consolidated Reserves Report, where the USDT issuer said it reduced its secured loans and cut its commercial paper holdings to zero.

Tether Records $700M Profit and Increases Treasury Bills to 58%

According to BDO, Tether reduced its secured loans by $300 million and increased the proportion of reserves held in U.S. Treasury bills to about 58%. The increase has taken Tether’s Treasury reserves to $39.7 billion. Tether burns the USDT that customers deposit and sends them an equivalent dollar amount from its reserves. Each USDT is worth $1.

The company also added $700 million net profit to its reserves. Consolidated assets exceeded liabilities by $960 million at the end of Q4 2022.

“With the presentation of this latest consolidated reserve report, Tether continues to deliver on our promise to lead the industry in transparency,” said Tether’s CTO Paolo Ardoino in a press release. He also lauded the company’s resilience in the face of bad press.

The stablecoin issuer came under pressure concerning the reserves backing its USDT stablecoin after the collapse of another algorithmic stablecoin, TerraUSD, spooked USDT investors, who rushed to redeem USDT 1:1 for U.S. dollars.

The wave of redemptions pushed USDT’s price to 95 cents in a depegging event.

Could Stock Market Suffer Treasury Contagion From Stablecoins?

One-year Treasury bills have become a go-to reserve asset for most major stablecoin issuers, including Tether, USDC issuer Circle, and Paxos, which issues the Binance-branded BUSD stablecoin. Circle owns around $12.7 billion of the debt instrument, while Paxos holds about $6 billion.

Decades-high inflation in the U.S. has pushed the Federal Reserve to cool down the economy by increasing interest rates to 4.5-4.75% in the last year. These rate hikes prompted investors to sell risky assets and push crypto prices down. The price drop negatively affected credit relationships between crypto firms, resulting in several bankruptcies and debt restructurings.

As the worst of the so-called crypto credit contagion dissipates, one academic suggests primarily Treasury-backed stablecoins can introduce another form of contagion that could rattle traditional markets.

While Federal Reserve Chair Jerome Powell has said that interest rates will likely continue in 2023 as the bank waits for proof that the U.S. economy is cooling, rising interest rates reduce the selling price of Treasury bills. Lower prices could force stablecoin issuers to take a hit when rushing to raise liquidity during a bank run. Recently, Silvergate Bank had to sell securities at a loss to increase liquidity for a wave of customer withdrawals.

Issuers could be forced to absorb further losses if they need to sell Treasury bills for less than their fair market value before they mature. A market dump could also destabilize the Treasury market for traditional investors.

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In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content.

David Thomas
David Thomas, a seasoned electronic engineer with nine years of expertise, has built a distinguished career by combining his passion for writing with an in-depth understanding of...