How Tether Rakes in Billions from USDT, While Juggling Critics and New Rules
Key Points:
- Tether (USDT) mostly gets rich off interest from its huge pile of U.S. Treasury bills.
- The company banked over $1 billion operating profit in Q1 2025, after a massive $13 billion+ net profit in 2024.
- BDO’s checks say Tether has more assets than it owes, with a nice “excess reserve” cushion.
- They’re also putting cash into Bitcoin, AI, green energy, and big building projects.
- Major headaches include EU’s MiCA rules and ongoing pressure for full-blown, top-tier audits.
Tether (USDT) is the giant in the stablecoin world, and its money-making machine, fed by its enormous reserves, churns out serious cash. But how does Tether make money, exactly? Since USDT is the go-to dollar-linked token in crypto, it’s important to get how Tether makes its money and handles profits, particularly with regulators breathing down its neck and demands for more openness getting louder.
The Main Money-Spinner: Cashing In on Reserves
Forget fancy crypto tricks; most of Tether’s earnings come from something quite old-fashioned: interest collected on its mountain of reserves. The idea is that these reserves provide a dollar (or equivalent) backing for every single USDT in circulation.
By the start of 2025, Tether’s bet on U.S. Treasuries neared an eye-watering $120 billion— $99 billion held outright and more via money market funds and reverse repo deals. With interest rates higher, this huge pile of U.S. government debt prints serious money. In just the first three months of 2025, these old-school investments helped Tether rake in over $1 billion in operating profit, hot on the heels of a stunning $13 billion plus net profit for all of 2024.
Beyond just U.S. government paper, Tether’s piggy bank also holds money market funds, overnight reverse repos, and smaller portions of things like company bonds, shiny gold (worth $6.66 billion in early 2025), and even Bitcoin (topping $7.66 billion then). Tether says all this is there to keep USDT steady and easily cashable.
Fees and Fresh Ventures: Spreading the Earnings
While interest from reserves is the main cash cow, Tether pulls in some extra money from service fees, though these charges mostly hit the big institutional players, not your average Joe trading on an exchange:
- Making and Cashing Out USDT: If you’re dealing directly with Tether.to to get new USDT or swap it back for cash, they’ll hit you with some fees. New accounts usually pay $150 to get verified. You can’t deal in less than a cool $100,000, and making new USDT costs 0.1%, while cashing out costs either $1,000 or 0.1%, whichever is more.
- Exchange Perks: Tether itself won’t charge you to send USDT to a friend on a blockchain (you’ll pay network gas for that), but since USDT is practically everywhere on trading platforms, they might get some back-door benefits from deals with those exchanges.
- Oops! Recovery Charges: If you accidentally send your tokens to the wrong place, Tether might lend a hand to get them back, but they’ll want a fee for their trouble.
On top of that, Tether’s spreading its bets. They’ve put money into digging for Bitcoin, building out AI systems (there’s talk of a $5 billion AI plan with a platform due by early 2025), developing peer-to-peer chat tools, and even dipping into agriculture. Generally, this investment cash is kept apart from the funds that back the actual USDT tokens.
What’s Done with the Windfall? Bigger Buffers and Bold Bets
So, what’s Tether doing with all this extra cash? They say it’s going in two main directions:
- Beefing Up the Safety Net: A big chunk of the profits gets plowed back into what they call “excess reserves.” Think of it as extra money piled up beyond the strict 1-to-1 backing for all the USDT out there. By the end of March 2025, this safety stash was $5.6 billion, designed to give USDT extra stability. Interestingly, that was down from $7.1 billion at the close of 2024, apparently because Tether paid out $2.3 billion in dividends during early 2025 – though they haven’t said who got that cash (it wasn’t USDT holders).
- Placing Strategic Bets: Like we touched on, profits are also fueling Tether’s push into new areas. Back in May 2023, they announced a plan to consistently use up to 15% of their net operating earnings to buy Bitcoin, aiming to make their reserves even stronger. Pouring money into AI, renewable power, and data facilities also fits into their bigger picture for the future.
Walking the Transparency Tightrope: Attestations Under Fire
Every quarter, Tether puts out “attestation reports,” currently handled by BDO Italia, which are meant to give a peek into what’s backing USDT and their overall financial health. These reports always paint a picture of assets outstripping liabilities. Take March 31, 2025: they listed about $149.3 billion in assets against $143.7 billion in liabilities (almost all of that being the digital tokens they’ve issued).
The big “but” here, and it’s a complaint that won’t go away, is that these check-ups aren’t the same as a full-blown, independent audit from one of the “Big Four” accounting giants. Skeptics say these reports just capture a moment and don’t dig nearly as deep as a thorough audit would. Tether’s boss, Paolo Ardoino, admits they want a full audit – calls it a “priority” even – but he also points out that the major accounting firms are hesitant to get involved, worried about the potential damage to their own names.
What’s more, the public doesn’t get much detail on who exactly Tether has lent money to through secured loans, or the nitty-gritty of what’s inside their money market fund holdings – something rating firms like S&P Global have pointed out.
Wrestling with Worldwide Rules
Tether is trying to make its way through a tricky and ever-tightening web of global rules. They’ve already had to settle with watchdogs like the New York Attorney General (NYAG) and the Commodity Futures Trading Commission (CFTC) for not being entirely upfront about what backed their reserves, which cost them fines and forced them to share more information.
Right now, a major headache is the European Union’s Markets in Crypto-Assets (MiCA) law. MiCA lays down tough new rules for stablecoin companies, covering everything from how they manage reserves to getting licensed, and the clock is ticking towards a March 2025 deadline. Tether isn’t thrilled with some of MiCA’s demands, and a few exchanges are already kicking USDT off their platforms or limiting it for European customers because of these upcoming rules. Tether’s CEO has even hinted they might skip trying for full MiCA approval and just concentrate on business outside the EU.
Over in the States, lawmakers are looking at bills like the GENIUS Act, which would mean more eyes on stablecoin outfits; this could shake things up for Tether if it wants to grow its U.S. business, though the company did just say it’s cooking up a separate stablecoin just for the U.S. market. Meanwhile, Tether got its first official license as a stablecoin provider in El Salvador, and Q1 2025 was its first period operating under that country’s watch.
Market Muscle and the Bitfinex Link
Even with all the side-eye it gets, USDT is still the undisputed king of stablecoins. By May 2025, its market value topped $151 billion, and it controlled something like 62-66% of the entire stablecoin pie. Because it’s so deeply woven into how crypto trading works, it benefits from just being everywhere.
Regulators have also spent a lot of time looking at the close ties between Tether and the Bitfinex crypto exchange, mainly because they share the same parent company, iFinex Inc., and have some of the same people in charge. Earlier probes uncovered how financially intertwined they were, even revealing that Bitfinex had borrowed from Tether’s reserves.
Dangers and the Path Forward
While Tether’s money-making formula is minting cash hand over fist with today’s interest rates, it’s not a risk-free game. There are dangers like their banking buddies or asset keepers running into trouble, the chance their mix of reserve holdings might be hard to sell off quickly if the market panics, and the constant shadow of new rules. If enough people suddenly lost faith and tried to cash out their USDT all at once – a “run” – it could send shockwaves through the entire crypto market.
It looks like Tether’s game plan is to keep its main business strong by sticking to a fairly cautious approach with its reserves, mostly holding U.S. Treasuries. At the same time, they’re dipping their toes into new tech fields and trying to grow their footprint in up-and-coming markets. And they just keep cranking out huge amounts of USDT, a lot of it on networks like Tron, simply because traders and investors keep asking for more.
Whether Tether can keep this success story going hinges on if it can hold onto people’s trust, successfully weave through the constantly changing rules, and stay ahead of rivals. Sure, the profits are eye-popping, but the constant drumbeat for more openness and the hurdles thrown up by worldwide regulators are going to be what everyone talks about when they talk about Tether for the foreseeable future.
