When you hear about USD 13 billion in annual profits, most people think of tech giants or investment giants like BlackRock.But this year, this staggering result was achieved by a company with a few dozen employees and an opaque structure: Tether, the issuer of the world’s largest stablecoin, USDT. How did a crypto startup manage to surpass the revenues of traditional investment giants? And what exactly does Tether do to make it so profitable?
Article content – Tether:
A digital dollar for the crypto world
Tether Holdings Limited is behind the stablecoin USDT, a special cryptocurrency pegged to the US dollar. In other words, 1 USDT always represents a value of 1 USD. This has made USDT a kind of “digital dollar” in the crypto world, enabling fast and cheap transfers between exchanges, decentralized applications, or individuals across continents, without lengthy banking processes.
Tether has filled a gap that traditional banks have long ignored: fast and global settlement of trades. Today, USDT dominates the stablecoin market with a share of over 70% and a market capitalization of over $150 billion. This means that Tether holds roughly as much money (or its equivalent) in its reserves as there are USDT in circulation.
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How does Tether make billions?
At first glance, it might seem that Tether just holds dollars to cover USDT and provides a simple service. But that’s the trick:
- The money that users “deposit” in exchange for USDT does not end up in a regular interest-free account.
- Tether invests these funds heavily, primarily in short-term US government bonds (Treasuries).
Thanks to the US central bank’s sharp interest rate hikes in recent years, even relatively short-term government bonds are easily yielding 5% per annum. And since Tether holds up to $113 billion in these securities alone, according to the latest reports, profits are growing at a dizzying pace. In 2024 alone, the company’s net profit reached an incredible $13 billion, which is more than the annual profit of BlackRock, the world’s largest asset manager.
Tether – Other sources of profit
In addition to interest income, Tether also collects smaller fees for exchanges and transactions, and in recent years has expanded its investments beyond government bonds. For example, it holds gold, bitcoins, and shares in companies in the AI and data center sectors. It is this diversification that has brought further capital gains.
Also worth mentioning is the Tether Evo project, which includes a number of investments in artificial intelligence and advanced technologies. The company is thus building new legs so that it is not solely dependent on stablecoins and the interest rate environment.
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Success built on a paradox
But there is another side to the coin. Tether makes money mainly because it has the ability to work with huge sums of foreign money entrusted to it in exchange for digital tokens. And all this with minimal operating costs – the company reportedly has only a few dozen employees, no massive branches, and no complex branch structures like banks.
This is the secret to its extreme profitability. While large banks and investment houses have to pay thousands of people, branches, compliance, licensing, Tether operates more or less “on the network.” It is not even a bank, so it is subject to fewer regulations (for now).
Tether – Criticism and risks
However, Tether faces long-standing criticism for the lack of transparency of its reserves. Although it now publishes regular quarterly reports verified by an auditor (so-called “attestations”), these are still not full audits of the kind that would be required of a similar institution by the US SEC or European regulatory authorities.
In addition, Tether has a history of scandals – in 2021, it paid a $41 million fine for misleading information about the composition of its reserves. Part of the market therefore continues to speculate whether Tether would actually be able to redeem all of its USDT in the event of a massive “run on stablecoins.”
There are also geopolitical and criminal risks. Thanks to the anonymity of crypto transactions, USDT has become a popular tool for dubious activities. Although Tether now cooperates with the authorities and freezes hundreds of suspicious addresses, its reputation in the eyes of some regulators has not suffered.
What does this mean for the world of finance?
Tether has shown that even a small, relatively inconspicuous company from the crypto world can earn more than traditional financial giants thanks to a simple business model and clever use of the interest rate environment. It is a fascinating example of how the balance of power is shifting in a globalized and digitized economy — and how huge financial volumes can now circulate outside the traditional banking system.
At the same time, however, it raises fundamental questions. If something were to go wrong — for example, if the reserves turned out to be less robust than expected, or if there were a sudden mass outflow of funds — it could shake not only the crypto world, but also the broader financial markets. That is why Tether remains in the crosshairs of regulators around the world.
The future will tell whether Tether will become a stable pillar of a new era of finance or a cautionary tale of what can happen when huge amounts of money are managed by an opaque structure outside the reach of traditional regulation.
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