Tether Holdings, the issuer of the stablecoin USDT, has claimed that every USDT in circulation is overcollateralized and backed “in excess of 81% by cash and cash equivalents” without any commercial paper exposure. In a blog post on February 16, Tether Holdings emphasized the soundness of their stablecoin, as US regulators appear to be scrutinizing crypto projects, especially stablecoin issuers. Tether Holdings has locked $39 billion in United States Treasuries out of their cash reserves, while the remainder is tied to money market funds, reverse repo agreements, and cash and bank deposits that can be easily redeemed for cash on demand.
By keeping their reserves in treasuries and other liquid collateral, Tether Holdings is assuring the community that they are highly liquid, enabling them to process redemption demands of any size. The USDT issuer redeemed over $22 billion in 2022 alone. Additionally, the issuer reported making over $700 million in net profits in 2022, boosting their excess reserves to $982 million.
USDT now commands a larger market share, exceeding 50%, with 69,785,731,025 USDT in circulation across major blockchains and sidechains such as Ethereum, Tron, Polygon, and Arbitrum. Although USDT is gaining market share, there has been no official audit on Tether reserves. However, they constantly issue attestation reports, and the latest report by BDO showed that every coin is sufficiently backed since Tether’s assets exceeded their liabilities.
The recent order from the New York Department of Financial Services (NYDFS) directing Paxos, the issuer of BUSD, to halt minting new tokens and focus on redemption has caused BUSD to slide in market capitalization, falling from $16,104,828,484 circulating supply in the past two weeks on Feb. 1 to $13,853,012,963 circulating supply as of Feb. 16, putting BUSD at eighth place in the market cap leaderboard. Despite this, the average USDT trading volume is up over 60%, rising to $58,591,117,003 on Feb. 16.