Tether in an era of change: records, investments and regulatory challenges
Financial performance and investments
In the third quarter of 2024, Tether reported a record net income of $2.5 billion, the highest quarterly total in the company's history. Cumulative profits for the first three quarters reached $7.7 billion. The USDT stablecoin capitalization grew 30%, increasing by $27.8 billion to $120 billion by the end of September. These results demonstrate Tether's stability and financial strength.
The company also continued to diversify its reserves. At the end of the third quarter, Tether owned nearly 75.4 thousand Bitcoin (BTC), equivalent to $4.78 billion. In addition, a significant portion of its reserves were invested in U.S. Treasury bonds, underscoring the company's conservative approach to asset management.
Strategic initiatives and business expansion
In the second half of 2024, Tether announced plans to invest approximately half a billion dollars over the next six months to become one of the world's leading Bitcoin miners. This investment includes part of a $610 million credit line to publicly traded mining company Northern Data AG, whose shares Tether acquired in September.
In August 2024, Tether announced the launch of a stablecoin pegged to the dirham of the United Arab Emirates (UAE). Like several other Gulf currencies, the dirham is pegged to the U.S. dollar, making this move a logical expansion for the company.
Tether is partnering with local companies Phoenix Group and Green Acorn Investments for this project. The new stablecoin will be fully backed by liquid reserves in the UAE, ensuring its stability and users' trust.
The launch of the dirham-linked stablecoin has several objectives:
- Providing users with the ability to use a stablecoin pegged to the region's stable currency, which is particularly relevant for businesses and individuals transacting in the UAE.
- Using a stablecoin can reduce commissions on international transfers and trade transactions, increasing the efficiency of financial transactions.
- The peg to the dirham stably pegged to the U.S. dollar, protects users from sharp currency fluctuations.
The UAE is actively developing the digital finance sector and aims to become a global hub for cryptocurrency technology. Launching a stablecoin pegged to the dirham could help strengthen Tether's position in the region.
Tether continued its expansion into artificial intelligence (AI). The company invested $200 million in Blackrock Neurotech, a neurotechnology company specializing in brain-computer interfaces.
Blackrock Neurotech is a pioneer in BCI technology. The company develops neural implants that allow people with paralysis, loss of function, or neurological disorders to control devices with their thoughts. Blackrock Neurotech's technology has already helped more than 40 patients perform activities such as robotic arm control, wheelchair mobility, and even driving.
Tether CEO Paolo Ardoino said, "Blackrock Neurotech is just the beginning of our journey towards projects that redefine the boundaries of what is possible at the intersection of technological innovation and human potential." Blackrock Neurotech co-founder Florian Solzbacher added: "My life dream is to help and restore function to people who have lost it and to advance technologies that revolutionize healthcare and the world around us." The long-term goal of the collaboration between Tether and Blackrock Neurotech is to contribute to the evolution of humanity through a secure connection between the human brain and artificial intelligence.
Claims of regulators
Despite significant financial success, Tether has faced regulatory challenges. In October 2024, The Wall Street Journal reported that Tether was the subject of a federal criminal investigation into possible sanctions violations and anti-money laundering rules.
The investigation is focused on whether the USDT stablecoin was used by third parties to fund illegal activities such as drug trafficking, terrorism, hacking, or laundering the proceeds of these crimes. In addition, the U.S. Treasury Department is considering imposing sanctions against Tether because of its alleged ties to under-sanctioned organizations, including terrorist groups and arms dealers.
Reports of the investigation have raised concerns in the cryptocurrency market, given USDT's key role in digital asset trading. However, Tether maintains that its operations are fully compliant with the law, and the company is taking steps to ensure transparency and compliance with all regulatory requirements.
Tether's market position
The Tether (USDT) stablecoin faces a marked decline in its share on centralized cryptocurrency exchanges (CEX) in 2024. According to data from analytics firm Kaiko, USDT's market share on the CEX decreased from 82% to 74% over the year. This decline is due to several factors:
- The emergence of new stablecoins, such as FDUSD, has led to a redistribution of market share. Some of these stablecoins received support from major exchanges, such as Binance, contributing to their rapid growth.
- Users have started favoring stablecoins that meet regulatory requirements. For instance, USDC's market share increased, reaching 12% by June 2024, driven by trading volumes on platforms such as Binance, Bybit, and OKX.
- The adoption of MiCA regulations in Europe has increased the demand for stablecoins that are compliant with this legislation's requirements. This has led market makers to favor compliant stablecoins such as USDQ, EURQ, EURC, EURCV, which has also contributed to the decline in the share of USDT.
- Some exchanges, such as Binance, ran promotions with zero commission for certain stablecoins, which attracted traders and helped increase trading volumes of these assets to the detriment of Tether.
Conclusion
In the second half of 2024, Tether has proven its ability to adapt to challenges and capitalize on growth opportunities. Tether plays a vital role in the global stablecoin market by adjusting to changes in user preferences and the regulatory environment. The company's long-term success will depend on its ability to respond effectively to challenges while maintaining an innovative and financially sustainable model.