Stablecoins Grow Big, But Tether’s Treasury Tricks Raise Questions

Tether, the largest holder of U.S. Treasuries, boasts approximately $135 billion in bonds. This staggering figure surpasses the holdings of countries like South Korea and Germany. The company amasses substantial interest by investing the funds from USDT purchases into these bonds.

How Tether Operates

• Investment Process: Individuals or companies seeking USDT transfer dollars to Tether, which then purchases Treasury bills with the received cash.
• Profit Margin: Tether retains the interest earned, resulting in a $10 billion profit in the first nine months of 2025—outperforming many S&P 500 banks.

The Lending Dynamic

• Zero-Percent Lending: USDT holders essentially lend money to Tether at a 0% interest rate.
• Yield Retention: Tether converts this capital into Treasuries, pocketing the yield.
• Emerging Alternatives: New stablecoins like JupUSD from Jupiter aim to share the yield with users, but only when deposited into a lending platform—not by mere holding.

Market and Regulatory Landscape

• Market Potential: The stablecoin market, valued at $315 billion, is poised for rapid evolution.
• Regulatory Framework: The upcoming GENIUS Act will establish rules for stablecoins, potentially driving an additional $2 trillion in demand for U.S. Treasuries, as noted by Treasury Secretary Scott Bessent.

Critical Considerations

• Fairness and Safety: The concentration of Treasury holdings within a single private entity raises concerns about systemic financial risks.