- DeFi analyst Cryptopainzy reveals that Tether holds $1.5 billion worth of BTC.
- To maintain the peg, Tether may liquidate these BTC holdings; says the analyst
- Tether’s CTO reaffirmed that the majority of Tether’s outstanding tokens are backed by secure Treasury bills.
Tether Chief Technology Officer Paolo Ardoino clarified in his recent tweet that the 1.5 billion in BTC are bought using excess reserves, representing the company’s equity.
On June 15, Ardoino tweeted that Tether is presently in a state of overcapitalization by an excess of over $2.5 billion. This surplus is in addition to the minimum reserves of 100% that Tether diligently maintains to cover all outstanding tokens.
The above was a reply to DeFi analyst Cryptopainzy’s tweet, noting that “$USDT holds $1.5 billion worth of $BTC.” According to the Twitter user, under significant strain, it may become necessary for Tether to liquidate these holdings to uphold the peg. Moreover, they claim that the acquisition of said BTC was initially funded by profits.
Cryptopainzy further tagged Terraform Labs co-founder and LUNA founder Do Kwon on the tweet, adding,
$1.5B BTC to defend the peg, does that remind you of @stablekwon?
However, to further reinforce their position, the USDT CTO cited that the vast majority of these outstanding tokens are backed by secure Treasury bills (t-bills). He reminded the Twitter crypto community of Tether’s stand on excess equity and their Bitcoin position.
As per Ardoino, “company-owned excess reserves” signifies that Tether possesses a surplus of over 2.5 billion USD (equivalent), in addition to holding the mandatory 100% reserves to back its issued tokens. This surplus amounts to approximately 3% above the minimum reserve requirement.
While these excess reserves contribute to Tether’s shareholder equity, the company prioritizes the resilience of its stablecoin products. Unlike banks that can operate with fractional reserves, Tether believes this approach is not suitable for a stablecoin to maintain an additional cushion to safeguard its user base.
Additionally, on May 17, Tether announced its commitment to utilizing up to 15% of its monthly net operating profits, which includes realized profits from t-bills and similar investments, to purchase Bitcoin as part of its excess reserves.
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