Tether estimates around $1.6 billion in excess reserves to support USDT

Cryptocurrency firm Tether estimates it will make $700 million in profit in the March quarter, taking its total profit reserves to over $1 billion, the company’s chief technology officer told CNBC, revealing the latest numbers for the first time.

Tether issues the USDT stablecoin, which is pegged one-to-one with the US dollar. USDT is backed by real assets such as fiat currency and US Treasuries, so it is always one-to-one redeemable with US dollars.

Stablecoins are used by traders to move in and out of different cryptocurrencies without having to convert money back into fiat currencies.

Over the years, stablecoin issuers have been criticized for not being transparent enough about the type of assets they hold in reserve to back their digital currency. Tether held commercial paper, or short-term, unsecured debt issued by companies. But Tether did not disclose the type of firms or geographic location of companies it had sourced the debt from.

Tether eventually sold all of its commercial holdings and moved into US Treasurys, which are considered a more stable and reliable asset. The company produces so-called certificates, which are reports prepared by an auditor to certify the company’s reserves and assets it has.

The latest report Tether released for the December quarter showed that it had more assets than liabilities.

Tether then disclosed in February that it made $700 million in profit in the December quarter. The company’s total assets when liabilities are deducted amount to $960.6 million.

Paolo Ardoino, chief technology officer of Tether, said the company estimates that its surplus reserves will increase by $700 million in the current quarter, which is not yet over. That would take Tether’s surplus reserves to $1.66 billion. And it would be the first time Tether crosses the $1 billion mark.

“So this money stays in Tether in the main company to further capitalize the stablecoin,” Ardoino said.

Tether monetizes various fees, such as a $1,000 withdrawal fee (with a $100,000 minimum withdrawal requirement); from investments in digital tokens and precious metals; and from issuing loans to other institutions.

The value of all USDT in circulation has grown significantly this month from $70.98 billion on March 1 to $78.14 billion on Thursday, according to CoinMarketCap.

That’s thanks in part to the collapse of Silicon Valley Bank this month. Circle, which issues a rival stablecoin called USD Coin, revealed it had $3.3 billion of exposure to SVB. The USDC lost its dollar peg as investors became concerned about the currency’s stability. Investors flocked. After the US government stepped in to guarantee depositors, the USDC regained its bond after it said the US$3.3 billion USDC reserve deposit held at SVB will be fully available to the public.

Ardoino revealed Tether’s estimated profit for the current quarter while defending the company’s record. When asked if Tether would be able to withstand an event like the SVB crisis, Ardoino asked why people still question the reserves even after traditional lenders collapsed.

“First of all, seriously after Credit Suisse and all the others, all the banks that fail are you looking at Tether again?” Ardoino said, citing the volatility at Credit Suisse, which ultimately led to a $3.2 billion regulator-broker deal for UBS to buy the Swiss lender.

“Tether makes money and banks fail. So if you have to put money somewhere, I guess Tether is the safest of all the choices,” Ardoino said.

— CNBC’s Ryan Browne contributed to this report.