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Tether Becomes Major Player in US Treasury Market
Tether, the issuer of the largest stablecoin, USDT, is emerging as a significant buyer of US government debt, holding over $122 billion in Treasury bills. This positions the company among the top sovereign-level buyers of American debt, surpassing several nations in its investments. Tether's total exposure to US Treasuries exceeds $141 billion when including indirect positions, reflecting its growing influence in the market.
In 2024, Tether made net purchases of $33.1 billion in Treasuries, ranking seventh among foreign buyers of US debt. The following year, it continued its purchasing trend with an additional $28.2 billion, maintaining its seventh-place status. Tether's CEO has indicated that the firm aims to break into the top five purchasers of US Treasuries by 2026, driven by the growth of USDT and new product offerings.
The company's rapid expansion is fueled by an influx of new users, with approximately 30 million added each quarter, bringing the total user base to around 530 million. This growth in users increases demand for reserve assets, which Tether predominantly allocates to Treasury bills, generating significant profits from its Treasury portfolio. US Treasury Secretary Scott Bessent has noted the potential for stablecoin issuers like Tether to become a structural source of demand for Treasuries, with projections suggesting the sector could absorb between $800 billion and $1 trillion in US debt as it scales.
As legislation regarding stablecoins progresses in Congress, it is expected to formalize reserve requirements that would mandate Treasury holdings, further solidifying Tether's position in the market. However, the scale of Tether's investments raises concerns about liquidity risks in the event of a rapid redemption of USDT, which could necessitate the liquidation of substantial Treasury holdings.
Source: KLEA News