Tether, the issuer of the USDT stablecoin, reported in its Q1 2025 report a total exposure to US treasuries of nearly US$120 billion by the end of March 2025.

This amount includes both direct and indirect investments, according to the company’s quarterly report.

Direct holdings in US treasuries were US$99 billion. The remainder came from indirect exposure through money market funds and reverse repurchase agreements.

Tether also reported generating over US$1 billion in operating profit from traditional investments during the first quarter.

🔗 Source: The Block

🧠 Food for thought

1️⃣ Tether emerges as a major player in US Treasury markets amid shift in reserve strategy

Tether’s $120 billion Treasury exposure represents a remarkable transformation for a company that faced significant scrutiny over its reserves just a few years ago.

With $99 billion in direct Treasury holdings, Tether now ranks among significant sovereign holders of US debt, though still well behind Japan’s $1.1 trillion position 1.

This shift to Treasury-dominated reserves represents a dramatic evolution from Tether’s earlier reserve composition, which was previously criticized for opacity and reportedly included questionable assets and receivables 2.

The Q1 financial attestation showing $5.6 billion in excess reserves ($149.3 billion in assets backing $143.6 billion in tokens) reveals how Tether has built a significant capital buffer beyond its stablecoin obligations 3.

Tether’s quarterly profit of over $1 billion demonstrates how the company has transformed its business model to capitalize on higher interest rates, effectively operating partially as a money market fund that generates substantial returns from Treasury securities.

2️⃣ El Salvador emerges as strategic regulatory alternative for crypto firms avoiding traditional frameworks

Tether’s decision to operate under El Salvador’s regulatory oversight represents a calculated approach to navigate the global regulatory landscape, particularly as the company explicitly rejects compliance with the EU’s MiCA regulations 4.

El Salvador’s National Digital Assets Commission (CNAD) now supervises over $150 billion in digital assets, positioning the country as a significant alternative jurisdiction for crypto regulation 5.

The CNAD has developed a specialized regulatory framework tailored to crypto operations that has successfully attracted major industry players like Tether and Bitfinex, providing these companies with regulatory clarity while avoiding more restrictive regimes 6.