Tether, a leading stablecoin provider, has reported a remarkable net profit of USD 10 billion in 2024, positioning itself alongside major banking institutions despite having a smaller workforce.
The success of Tether highlights the profitability of stablecoins, which are designed to maintain a stable value by being pegged to traditional assets like the US dollar. Tether achieves this peg by holding one dollar in cash equivalents for every dollar of its stablecoin, USDT. The interest earned from these reserves contributes to Tether's impressive financial performance.
With a circulating supply of 140 billion USDT, Tether's business model has proven to be highly profitable. The demand for stablecoins has surged, particularly in the thriving crypto market, as they serve as a crypto-native dollar for traders and are widely used in decentralized finance (DeFi) protocols. Tether has capitalized on this trend, with the overall market capitalization of stablecoins exceeding USD 200 billion.
Tether's dominance is evident, as USDT represents 68% of the total stablecoin market capitalization, while its main competitor, Circle, has seen a decline in market share. The stablecoin market has faced challenges, especially for competitors like Circle, following the collapse of Silicon Valley Bank (SVB) in March 2023. This event affected the confidence in the USDC stablecoin. In contrast, Tether's USDT has maintained its value stability over the years, despite legal scrutiny and a lack of comprehensive audits of its reserves.
Tether's strategic positioning is further strengthened by its relationships with influential financial entities. Cantor Fitzgerald, a bank that holds a stake in Tether and manages a significant portion of its reserves, is led by Howard Lutnick, who was appointed by former President Trump as Secretary of Commerce. Lutnick has expressed a desire to deepen the business relationship with Tether, indicating the company's favorable position for growth in the United States.
Tether, originally founded in Italy, has established a second headquarters in Lugano, Switzerland. The company has supported the creation of a blockchain hub in Ticino, Switzerland, and committed up to USD 100 million to assist crypto start-ups through a dedicated fund. This collaboration has strengthened Tether's presence in Switzerland, known for its favorable regulatory environment for cryptocurrencies.
Tether's CEO, Paolo Ardoino, has expressed intentions to reinvest more than half of the company's net profit in the upcoming year. This reinvestment strategy aims to enhance Tether's operational capabilities and foster growth within the broader crypto ecosystem. Tether's financial performance and strategic initiatives will be closely monitored by industry stakeholders and regulators.