Tether Announces Plans to Buy Bitcoin for Reserve
- Tether has faced criticism in the past for its lack of transparency.
- More people embraced Tether as a safe haven in March after USDC was affected by the regional bank crisis in the U.S.
Tether, the company behind the USDT stablecoin, announced on Wednesday that it plans to routinely devote up to 15% of its net realized operating earnings to buying bitcoin for its stablecoin reserves, which it will directly custody. Tether now joins Microstrategy to manage its reserves.
Speaking about its decision to purchase more BTC, Tether said in a statement,
Tether’s purchase of BTC is part of its conservative and prudent approach to investment decisions aimed at strengthening, increasing, and diversifying its reserves. By implementing this framework, Tether aims to enhance transparency and provide a clearer view of the company’s performance and capital allocation strategy.
Tether noted that BTC was an obvious choice since it is the most popular cryptocurrency and has demonstrated itself to be a reliable long-term store of value. The company added that it made the decision to buy BTC based on the massive price increase the cryptocurrency has experienced over the last ten years and its resistance to conventional financial failures.
In a statement, Tether chief technology officer Paolo Ardoino noted that Bitcoin has huge potential as an investment asset. Ardoino further claimed that Bitcoin’s decentralized structure, wide adoption, and limited supply made it a “favored choice among institutional and retail investors alike.”
Ardoino, in a statement, explained that “our (Tether) investment in bitcoin is not only a way to enhance the performance of our portfolio, but it is also a method of aligning ourselves with a transformative technology.”
The decision follows Tether’s announcement last week that it owns $1.5 billion in bitcoin and $3.4 billion in gold, as well as other assets to support the value of USDT and associated stablecoins.
Stablecoins, valued at $131 billion, have played a huge role in the growth of the crypto economy in recent years, aiding financial transactions between fiat money and digital tokens by maintaining their price tied to an external asset, often the U.S. dollar.
Interestingly, Tether’s USDT is the third-largest digital asset globally, after bitcoin (BTC) and ether (ETH). Data from CoinGecko shows that USDT has a market capitalization of $82.7 billion. However, Tether has faced scrutiny over the authenticity and stability of its reserves.
Nevertheless, USDT has enjoyed increased popularity in recent months thanks to the U.S. regional banking crisis that affected Circle’s USDC in March.