USDT and USDC issuers are reviewing their asset collateral structure amid a volatile U.S. economy. Circle is adjusting its Treasury reserves, and Tether is adding Bitcoin and precious metals to its reserves.
According to Tether’s accounting report for Q1 2023, the USDT stablecoin has over $81.8 billion in collateral — about 85% of the reserves are in cash and short-term Treasury bonds. The report notes that there’s about $1.5 billion worth of BTC among the reserves and another $3.4 billion stored in precious metals.
Thus, Bitcoin accounts for approximately 2% of USDT’s total collateral, while reserves in precious metals account for about 4%. Notably, these asset categories weren’t listed in the company’s previous reports. Tether representatives stressed that the new categories in the USDT collateral structure are intended to demonstrate greater transparency in reporting, as well as reassure users that Tether’s reserves remain highly liquid.
The report also stated that the company’s net income for Q1 2023 was $1.48 billion and reserves exceeded debt by a record $2.44 billion. The company reps emphasize that most of Tether’s reserves are invested in Treasury bills with an average maturity of less than 90 days.
Recall that Tether recently issued a billion new USDT tokens of the ERC-20 standard on Ethereum, which, according to some experts, may signal a future increase in demand for crypto in general.
Circle, the issuer of USDC, the second-largest dollar stablecoin by cap, changed the structure of its reserves that back the coin. According to Circle CEO Jeremy Allaire, the company decided to switch to short-term U.S. Treasury bonds to avoid a possible default on U.S. debt. Allaire said the company would no longer hold Treasury bonds that expire after early June. “We don’t want to carry exposure through a potential breach of the ability of the U.S. government to pay its debts,” he said.
USDC’s supply was down 27% in Q1 2023 as the stablecoin temporarily lost its peg to the U.S. dollar amid Silicon Valley Bank’s bankruptcy.
