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As Matt Levine has said multiple times in "Money Stuff", Tether has found the perfect business plan. They hold billions of actual USD, and get to keep all of th

As Matt Levine has said multiple times in "Money Stuff", Tether has found the perfect business plan. They hold billions of actual USD, and get to keep all of the interest for themselves.

glitchc 1y ago
Cash doesn't earn interest. T-bills and money market funds earn minimal interest compared to equities. Given the size of their holdings, Tether is paying a huge opportunity cost for their position. I don't consider that good business.
- samtheprogram 1y ago
  They aren't just holding cash and/or doing nothing with it. Come on.
  - btilly 1y ago
    If you believe their attestations, they pretty much are. See, for example, https://assets.ctfassets.net/vyse88cgwfbl/2SGAAXnsb1wKByIzkhcbSx/9efa4682b3cd4c62d87a4c88ee729693/ISAE_3000R_-_Opinion_Tether_International_Financial_Figure_RC187322025BD0201.pdf https://assets.ctfassets.net/vyse88cgwfbl/2SGAAXnsb1wKByIzkh.... Most of the money is in Treasuries, or markets like overnight repos that behave much like Treasuries. Most of the rest is in things like corporate bonds, which again generally move like cash. Only their claimed excess equity is in riskier investments, like Bitcoin. If you doubt their attestation, it is more reasonable to doubt their claimed total assets before worrying about the breakdown of their investments.
- beeflet 1y ago
  that may be true but minimal interest is greater than no interest.
- crote 1y ago
  People are giving them money for free. They pay absolutely zero interest or dividend to "investors". For the crypto people, Tether's job is to accept money and do nothing with it. US debt is about as stable as the dollar itself, so to their crypto customers buying bonds is a no-op. Any yield is pure profit for Tether itself.
- eightysixfour 1y ago
  They have guaranteed returns on $185b of other people's money, and they only owe the other people the principal. That's like... the best business in the world? If it was all in 6m 2.8% treasuries they'd still be making $5.2b year for holding people's cash and running a token on the blockchain. How greedy do you have to be to look at that and say "yeah, well they could be getting bigger returns with an actively managed portfolio?" I'm pretty sure Tether was holding less cash than they said multiple times, and at multiple points it was just a house of cards where they were inflating the price of BTC on their own, but I'm also guessing by now they've had made enough to cover.
  - outside1234 1y ago
    Said another way, returns ALWAYS have to be risk adjusted. Sure they could _probably_ make more in Equities, but their approach is returns with zero risk, which is impossible to beat.
    - lotsofpulp 1y ago
      Depends if the purchasing power of the currency holds up. Real returns are what matter, and earning 3% “risk free” is not so “risk free” if the price of things you want to buy increase by more than 3%, etc.
      - nocoiner 1y ago
        Skimming 3% on OPM is still a pretty, pretty good business.
      - eightysixfour 1y ago
        Well, fortunately for them we are talking about amounts of money where inflation is irrelevant.
  - glitchc 1y ago
    Uh, internet dude, you must be new to finance. Banks have been doing this for centuries. Best business in the world? Sure. But it's even better when you invest in things that earn more, right? Like equities. That's what banks do. It's about the rate of return. Is it more risky? Sure. That's why they hold a diverse basket of goods, to diffuse the risk. But it's worth the risk when weighed against the opportunity cost of not investing and losing that rate of return. > How greedy do you have to be to look at that and say "yeah, well they could be getting bigger returns with an actively managed portfolio?" This is banking and finance. Greed only stops when you run into legislative limits, and sometimes, not even there.
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- yborg 1y ago
  I guess banking isn't a good business then.
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- deadbabe 1y ago
  They can invest all the interest they make into higher risk higher reward investments, like the S&P500.
- pshan 1y ago
  The business is good because of the high amount of leverage they have in those T-bills and money markets since those deposits are liabilities on the balance sheet. The actual return they make on the money the owners put into the business is probably great. Based on the Q2 2025 attestation [1] it looks like they have about 162B in assets and 157B in liabilities which leaves ~5B in shareholder equity. Even if they hold most of those assets in treasuries, they probably have an egregiously high return on shareholder equity. (Fun fact: I think this puts their leverage ratio as high as banks during the 2008 GFC. But treasuries should theoretically be safer than subprime mortgage loans). Equities would give a higher return on average, they don't really work when the liabilities can get called at any time. Tether has to be able to produce money for people exchanging their tether. If you were in their position and I gave you 150 billion dollars on the condition that I can withdraw that 150 billion dollars at any time. You'd probably also park it in a short-term money market fund. If you put it in equities and it dropped 1%, you'd be on the hook for 1.5 billion. [1] https://tether.io/news/tether-issues-20b-in-usdt-ytd-becomes-one-of-largest-u-s-debt-holders-with-127b-in-treasuries-net-profit-4-9b-in-q2-2025-attestation-report/ https://tether.io/news/tether-issues-20b-in-usdt-ytd-becomes...
  - throwaway-0001 1y ago
    Just that the condition is that you give them 150b and if you withdraw and they Dont have you lost 150b and nothing will happen. Good luck recovering your cash from El Salvador or bvi.
  - Karrot_Kream 1y ago
    > But treasuries should theoretically be safer than subprime mortgage loans A huge understatement, don't you think? ;)
- tim333 1y ago
  They can't ethically put the money into equities because they are obliged to redeem the tether tokens for USD on demand. It's the same thing that your bank manage can't take the cash in your account, bet it on nvda and take the profits if it goes up, unless they want to end up like SBF. They may have somewhat sketchily put money into bitcoin at times though.

As Matt Levine has said multiple times in "Money Stuff", Tether has found the perfect business plan. They hold billions of actual USD, and get to keep all of the interest for themselves.

glitchc 1y ago

Cash doesn't earn interest. T-bills and money market funds earn minimal interest compared to equities. Given the size of their holdings, Tether is paying a huge opportunity cost for their position. I don't consider that good business.

samtheprogram 1y ago
They aren't just holding cash and/or doing nothing with it. Come on.
- btilly 1y ago
  If you believe their attestations, they pretty much are. See, for example, https://assets.ctfassets.net/vyse88cgwfbl/2SGAAXnsb1wKByIzkhcbSx/9efa4682b3cd4c62d87a4c88ee729693/ISAE_3000R_-_Opinion_Tether_International_Financial_Figure_RC187322025BD0201.pdf https://assets.ctfassets.net/vyse88cgwfbl/2SGAAXnsb1wKByIzkh.... Most of the money is in Treasuries, or markets like overnight repos that behave much like Treasuries. Most of the rest is in things like corporate bonds, which again generally move like cash. Only their claimed excess equity is in riskier investments, like Bitcoin. If you doubt their attestation, it is more reasonable to doubt their claimed total assets before worrying about the breakdown of their investments.
beeflet 1y ago
that may be true but minimal interest is greater than no interest.
crote 1y ago
People are giving them money for free. They pay absolutely zero interest or dividend to "investors". For the crypto people, Tether's job is to accept money and do nothing with it. US debt is about as stable as the dollar itself, so to their crypto customers buying bonds is a no-op. Any yield is pure profit for Tether itself.
eightysixfour 1y ago
They have guaranteed returns on $185b of other people's money, and they only owe the other people the principal. That's like... the best business in the world? If it was all in 6m 2.8% treasuries they'd still be making $5.2b year for holding people's cash and running a token on the blockchain. How greedy do you have to be to look at that and say "yeah, well they could be getting bigger returns with an actively managed portfolio?" I'm pretty sure Tether was holding less cash than they said multiple times, and at multiple points it was just a house of cards where they were inflating the price of BTC on their own, but I'm also guessing by now they've had made enough to cover.
- outside1234 1y ago
  Said another way, returns ALWAYS have to be risk adjusted. Sure they could _probably_ make more in Equities, but their approach is returns with zero risk, which is impossible to beat.
  - lotsofpulp 1y ago
    Depends if the purchasing power of the currency holds up. Real returns are what matter, and earning 3% “risk free” is not so “risk free” if the price of things you want to buy increase by more than 3%, etc.
    - nocoiner 1y ago
      Skimming 3% on OPM is still a pretty, pretty good business.
    - eightysixfour 1y ago
      Well, fortunately for them we are talking about amounts of money where inflation is irrelevant.
- glitchc 1y ago
  Uh, internet dude, you must be new to finance. Banks have been doing this for centuries. Best business in the world? Sure. But it's even better when you invest in things that earn more, right? Like equities. That's what banks do. It's about the rate of return. Is it more risky? Sure. That's why they hold a diverse basket of goods, to diffuse the risk. But it's worth the risk when weighed against the opportunity cost of not investing and losing that rate of return. > How greedy do you have to be to look at that and say "yeah, well they could be getting bigger returns with an actively managed portfolio?" This is banking and finance. Greed only stops when you run into legislative limits, and sometimes, not even there.
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yborg 1y ago
I guess banking isn't a good business then.
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deadbabe 1y ago
They can invest all the interest they make into higher risk higher reward investments, like the S&P500.
pshan 1y ago
The business is good because of the high amount of leverage they have in those T-bills and money markets since those deposits are liabilities on the balance sheet. The actual return they make on the money the owners put into the business is probably great. Based on the Q2 2025 attestation [1] it looks like they have about 162B in assets and 157B in liabilities which leaves ~5B in shareholder equity. Even if they hold most of those assets in treasuries, they probably have an egregiously high return on shareholder equity. (Fun fact: I think this puts their leverage ratio as high as banks during the 2008 GFC. But treasuries should theoretically be safer than subprime mortgage loans). Equities would give a higher return on average, they don't really work when the liabilities can get called at any time. Tether has to be able to produce money for people exchanging their tether. If you were in their position and I gave you 150 billion dollars on the condition that I can withdraw that 150 billion dollars at any time. You'd probably also park it in a short-term money market fund. If you put it in equities and it dropped 1%, you'd be on the hook for 1.5 billion. [1] https://tether.io/news/tether-issues-20b-in-usdt-ytd-becomes-one-of-largest-u-s-debt-holders-with-127b-in-treasuries-net-profit-4-9b-in-q2-2025-attestation-report/ https://tether.io/news/tether-issues-20b-in-usdt-ytd-becomes...
- throwaway-0001 1y ago
  Just that the condition is that you give them 150b and if you withdraw and they Dont have you lost 150b and nothing will happen. Good luck recovering your cash from El Salvador or bvi.
- Karrot_Kream 1y ago
  > But treasuries should theoretically be safer than subprime mortgage loans A huge understatement, don't you think? ;)
tim333 1y ago
They can't ethically put the money into equities because they are obliged to redeem the tether tokens for USD on demand. It's the same thing that your bank manage can't take the cash in your account, bet it on nvda and take the profits if it goes up, unless they want to end up like SBF. They may have somewhat sketchily put money into bitcoin at times though.