Tether’s Profit Engine: How the Stablecoin Giant Rakes in Billions

Tether prints money—literally and figuratively. The stablecoin behemoth's latest earnings reveal a profit machine that would make traditional banks blush.

The Interest Rate Gold Rush

Tether's secret sauce? Parking its massive reserves in risk-free government securities. While regular banks struggle with single-digit returns, Tether's treasury operations generate yields that would make Wall Street veterans do a double-take. Every dollar of USDT backing gets put to work—earning while it waits for redemption requests.

Redemption Fees: The Silent Cash Register

Want to cash out your Tether? That'll cost you. The company collects fees on large redemptions—a brilliant business model where customers pay to access their own money. It's the financial equivalent of charging admission to exit the building.

Will the Party Last?

Regulatory clouds gather as lawmakers eye stablecoin operations with increasing suspicion. Tether's profitability depends heavily on maintaining its dominant market position—any significant shift toward competing stablecoins or CBDCs could puncture the revenue stream.

For now, Tether keeps minting profits faster than it mints new tokens. In crypto, being the dollar's digital shadow turns out to be wildly lucrative—until someone turns on the lights.

How Tether Makes Money

Tether issues the USDT stablecoin, which is pegged on a one-to-one basis with the US dollar. It’s the world’s third-biggest digital asset with a market capitalization of $183.2 billion — up 50% compared with this time last year.

The company says every single unit of USDT is backed by low-risk assets that generate yield — think US Treasury bills, money market funds, and cash equivalents. Surging interest rates during the coronavirus pandemic made this exceptionally profitable.

And while a lot of attention is paid to the likes of MicroStrategy and Metaplanet, Tether’s also a significant holder of Bitcoin. According to BitcoinTreasuries.net, the private company has 87,475 BTC in reserve, worth almost $10 billion at the time of writing.

Tether’s CEO Paolo Ardoino has described his company’s profitability as “very rare” — and assuming the figures are true, he’d be right. Given it isn’t listed on public markets, the numbers are difficult to verify.

Even though it isn’t short on cash, reports have recently suggested Tether is planning to raise $20 billion for a 3% stake. This WOULD give it a valuation of about $500 billion — ahead of Netflix and Samsung, and within touching distance of taking over legacy financial brands like Mastercard.

What’s Tether Spending Profits On?

Beyond Bitcoin, an extensive investment portfolio has begun to emerge. Tether now has a stake in the Italian football club Juventus, becoming its second-largest shareholder, with Ardoino suggesting he’d like to own the team outright.

Tether has also dabbled in Bitcoin mining startups and blockchain analytics in the form of an investment in Crystal Intelligence. Separately, Ardoino said a potential fundraise “from a selected group” of high-profile investors could help the business expand into a plethora of other business lines including “AI, commodity trading, energy, communications and media.”

Is Tether’s Profitability Sustainable?

This is the $15 billion question.

Right now, Tether is the undisputed market leader in the stablecoin space — especially in emerging economies looking for access to digital dollars.

However, USDT isn’t available in the European Union because it fails to comply with the trading bloc’s Markets in Cryptoassets Regulation, otherwise known as MiCA for short. That cuts off a population of 450 million people.

Tether is also planning to launch a separate stablecoin specifically for the US market. Known as USAT, this digital asset would aim to comply with American regulations.

Looking ahead, one of the biggest threats to this company’s continued profitability lies in increased competition from other stablecoin issuers. Right now, its nearest rival is Circle, but USDC has a much smaller market cap of $76 billion. But following on from the GENIUS Act, the real danger could come from traditional financial institutions launching their own stablecoins. As Cryptonews reported earlier this month, nine Wall Street banking giants are now teaming up to work on a jointly backed stablecoin focused on G7 currencies.

We also need to talk about the big elephant in the room: the Federal Reserve is now getting into a position where it will be cutting interest rates more regularly — with Donald TRUMP piling pressure on Fed chair Jerome Powell. Over time, this will reduce the return that Tether receives on the funds backing the USDT in circulation. Lower yields mean the company’s box office profits may only be able to grow if Tether’s market cap continues to accelerate.