A cryptocurrency firm has stealthily climbed the ranks of America’s top debt buyers, rivalling economic powerhouses like Germany and Mexico. Tether, the issuer of the world’s largest stablecoin, USDT, purchased $33.1 billion in U.S. Treasury securities last year. This positions it as the seventh-largest foreign buyer. This shift highlights how digital assets are reshaping global finance.
Why Tether Is Stockpiling U.S. Debt
Tether’s Treasury binge stems from surging demand for its stablecoin. Each USDT token claims 1:1 backing by reserves, including cash and government debt. As adoption soared, particularly in developing nations, Tether ramped up purchases to meet liquidity needs. CEO Paolo Ardoino revealed the $33.1 billion net buy, outpacing countries like Canada.
On the other hand, traditional holders like Japan and China reduced Treasury investments, creating an opening. U.S. officials also endorse stablecoins as tools for dollar dominance. “Crypto expands the dollar’s reach,” President Trump asserted at a March summit, urging supportive policies. Treasury Secretary Scott Bessent echoed this, calling crypto “critical” for global influence.
Stablecoin Boom
Tether’s Treasury splurge mirrors explosive growth in stablecoins. USDT’s market cap surged $45 billion in 2023, dwarfing Circle’s USDC, which added $19 billion. Today, USDT commands 62% of the $230 billion stablecoin market, serving over 400 million users. Many rely on it in regions with unstable currencies, like Latin America and Africa.
“We’ve advanced financial inclusion more than anyone,” Ardoino claimed at a Bitcoin Policy Institute event. Yet critics highlight Tether’s opaque reserves. Unlike audited USDC, Tether faced scrutiny but still posted a $13 billion net profit in 2023, a record despite European regulatory clashes.
Regulatory Issues To Watch Out
Tether’s dominance faces risks. A proposed U.S. bill could block offshore issuers from Treasury markets, favouring rivals like USDC. Analysts warn this might force Tether to diversify reserves or lose ground. Ardoino remains defiant, arguing Tether strengthens U.S. debt markets. “If we were a country, we’d rank 18th in Treasury holdings,” he stated.
Political winds offer hope. Trump and Bessent advocate stablecoin-friendly policies to bolster the dollar. At March’s Digital Asset Summit, Trump urged Congress to pass clear regulations, calling crypto vital for economic leadership. Still, uncertainty lingers as lawmakers debate oversight.
Tether’s Financial Power Defies Expectations
Despite regulatory headwinds, Tether’s growth is staggering. The firm issued 23 billion USDT in Q4 2023 alone, contributing to a yearly total of 45 billion. Reserves now exceed $143 billion, triple USDC’s $59 billion. Profits hit records even as rivals grappled with 2023’s crypto winter.
This resilience silences critics who predicted Tether’s collapse after past legal battles. However, risks remain. Heavy reliance on Treasury bonds could backfire if U.S. debt ratings slip. For now, Tether bets the dollar’s appeal will endure, anchoring its strategy.
Crypto’s Role in Dollar Dominance
Washington’s growing crypto embrace aligns with Tether’s strategy. Bipartisan support positions stablecoins as modern tools for financial influence. By funnelling billions into Treasury bonds, Tether positions itself as a guardian of dollar hegemony. “We’re strengthening America’s infrastructure,” Ardoino argued.
As the 2024 election nears, crypto policies gain traction. A Trump win could boost Tether through relaxed regulations, while stricter rules might slow but not halt its ascent. Either way, Tether’s Treasury trove isn’t just an investment. It’s a bold play to cement crypto’s role in global finance.
