Tether To Buy Bitcoin With 15% Of Its Net Profit To Back Stablecoin Reserves

Cryptocurrency giant Tether has said it plans to buy more bitcoin worth millions of dollars to back its stablecoin reserves.

Tether announced its plans Wednesday to invest "15% of its net realized operating profits towards purchasing Bitcoin" on a monthly basis and "diversify" the reserves backing its USDT tokens. The 15% would roughly amount to $222 million considering the latest attestation report issued by the company where the stablecoin issuer logged $1.5 billion in net profits.

According to the company, Bitcoin was an apparent choice considering that the cryptocurrency has emerged to be a long-term store of value assets. Tether also underlined Bitcoin's gigantic surge in price over the past decade and increasing resilience against financial failures for investing in the cryptocurrency, as per CoinTelegraph.

The company will keep the BTC in self-custody, without using any third-party custodians, CoinDesk reported.

Tether chief technology officer Paolo Ardoino stated that Bitcoin's decentralized and omnipresent nature and limited supply make it a "favored choice among institutional and retail investors alike."

"The decision to invest in Bitcoin, the world's first and largest cryptocurrency, is underpinned by its strength and potential as an investment asset," Ardoino said in a statement. "Our 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 that has the potential to reshape the way we conduct business and live our lives."

The company behind Tether, the biggest stablecoin in the market (worth $82 billion), appears to be following in the footsteps of MicroStrategy to manage the world's largest reserve with the help of Bitcoin.

American business intelligence firm MicroStrategy is following a similar Bitcoin investment plan, actively adding cryptocurrency to its treasury. But while MicroStrategy doesn't have a particular time frame for its Bitcoin investment plan, Tether intends to do it every month.

A Tether spokesperson said it would use a small portion of its net profit into buying Bitcoin, while the rest of the excess income would be invested into business expenses.

"The aim is to keep the Bitcoin portfolio value well below the size of our total excess reserves that accounted for 2.48B at the end of Q1/2023, while Bitcoin holdings accounted for 1.5B," the Tether spokesperson told CNBC.

With this move, Tether could potentially emerge to be a bigger Bitcoin holder. The company already has over $1.5 billion worth of Bitcoin on its balance sheet at the end of the first quarter of 2023. Bitcoin holding makes up around 2% of Tether's total reserves, while 85% of the holdings are held in cash and other short-term deposits, including Treasury bills. Besides BTC, Tether holds $3.4 billion of gold, among other assets, to back its USDT and other smaller stablecoins.

Meanwhile, the U.S. Department of Justice (DOJ) has been investigating top officials at Tether over a possible bank fraud in the early days of the stablecoin. In November 2022, the investigation was transferred to a DOJ team under the directive of U.S. Attorney Damian Williams of Manhattan in the Southern District of New York (SDNY), as per a Bloomberg report.

Federal prosecutors in Washington were investigating whether Tether executives concealed the nature of its crypto transactions and misled its banking partners.