17 May 2023 - Tether International Limited (Tether), the company managing the reserves of the first and most widely used stablecoin, announced today its latest investment strategy aimed at further strengthening its reserves portfolio.
Starting this month, Tether will regularly allocate up to 15% of its net realized operating profits towards purchasing Bitcoin (BTC). Tether anticipates that the current and future BTC holdings in its reserves will not exceed the Shareholder Capital Cushion and will further strengthen and diversify the reserves. As reflected in Tether’s Q1 2023 Assurance Report, as of the end of March 2023, Tether already held approximately $1.5 billion in BTC in its reserves. While it is common practice among many institutional investors to third-party custody their Bitcoin, Tether believes in the philosophy "Not your keys, not your bitcoin" and takes possession of the private keys associated with all of its Bitcoin holdings.
Under this new approach, Tether will focus exclusively on utilizing realized profits from its investment strategy, disregarding unrealized capital gains generated by price increases. This means that Tether will consider only the tangible gains from its operations, which consist of the difference, between purchase price and net proceeds from the sale or, in case of a maturing investment, between the purchase price and the reimbursed amount (for example the notional amount for a zero coupon investment like with U.S. treasury bills).
Tether’s purchase of BTC is part of its conservative and prudent approach to investment decisions aimed at strengthening, increasing and diversifying its reserves. By implementing this framework, Tether aims to enhance transparency and provide a clearer view of the company's performance and capital allocation strategy.
"The decision to invest in Bitcoin, the world's first and largest cryptocurrency, is underpinned by its strength and potential as an investment asset,” said Paolo Ardoino, CTO of Tether. “Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential. Its limited supply, decentralized nature, and widespread adoption have positioned Bitcoin as a favored choice among institutional and retail investors alike. Our investment in Bitcoin is not only a way to enhance the performance of our portfolio, but it is also a method of aligning ourselves with a transformative technology that has the potential to reshape the way we conduct business and live our lives.”
Tether believes that Bitcoin has demonstrated its investment potential with a track record of impressive returns over the past decade. Its performance, combined with increasing recognition and adoption by major financial institutions, has cemented Bitcoin's position as a key component in diversified investment portfolios.
By incorporating Bitcoin into its investment strategy, Tether aims to capitalize on the digital asset's potential growth, while leveraging its position as a trusted and reliable financial infrastructure provider. Tether's decision to allocate a portion of its net realized operating profits towards Bitcoin highlights the company's confidence in the cryptocurrency market and its belief in supporting the broader ecosystem.
Among other smaller investments performed with its own capital, Tether Group is focusing on building communication (through peer-to-peer technologies like Holepunch), energy and bitcoin mining infrastructure
Tether will continue to adhere to stringent risk management practices to ensure the stability and security of its operations. The company remains steadfast in its commitment to maintaining the stability of its flagship stablecoin, Tether (USD₮), while exploring innovative opportunities in the ever-evolving digital asset landscape.
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