Last Updated on May 18, 2023 by Bitfinsider
Tether announced on Wednesday that it would begin making regular purchases of Bitcoin to boost its excess reserves. Starting this month, the corporation will set aside up to 15% of its net realized operational income towards the acquisition of the biggest cryptocurrency on the planet.
According to Paolo Ardoino, CTO of Tether, whom said: “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.”
The largest stablecoin in the market and the third-largest cryptocurrency after Bitcoin and Ethereum is produced by Tether. Cryptocurrencies known as stablecoins have prices based on “stable” assets, such as the dollar.
According to an assurance report from March of this year, the corporation has Bitcoin reserves worth almost $1.5 billion.
The amount allocated to the new investment strategy will be determined by realized earnings, excluding unrealized gains from portfolio price increases.
The company has $2.5 billion in extra reserves in addition to the 100% reserves that back issued tokens, according to a tweet from Ardoino. Interest rates on US Treasury notes and other investments, such as gold, are to blame for this.
The need for Tether to maintain a further buffer to better safeguard its user base was stressed by the man. “Banks can do fractional reserve, but we believe that’s not a viable strategy for a stablecoin,” he stated.
Tether boasted of “tremendous success” in its most recent financial update, noting that net profits had reached $1.48 billion in the first quarter and reserves were at an all-time high.
However, the company has recently been the target of assertions that its reserve claims are “dubious,” with former Securities and Exchange Commission enforcement attorney John Reed Stark asserting that the firm’s routine unaudited attestations are “meaningless.”
Tether’s detractors have raised questions about whether it discloses enough information on the U.S. dollar reserves that are meant to back USDT.
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