A significant part of Tether’s investment strategy involves AI. The company has already invested more than $1 billion into the sector.
Tether Holdings Ltd, the issuer of the USDT stablecoin and a leading player in the crypto industry, is gearing up for a substantial investment spree. According to CEO Paolo Ardoino, Tether Investments is poised to inject more than $1 billion into various deals over the next 12 months.
With a team of 15, the investment arm is not limiting itself to a single sector. Ardoino stated that the company evaluates hundreds of pitches monthly, primarily from startups. Their focus spans across alternative financial infrastructure for emerging markets, artificial intelligence (AI), and biotechnology. These are areas where Tether has already invested around $2 billion over the past two years.
Tether’s Financial Strength
Tether’s USDT stablecoin tracks the US dollar and boasts a market capitalization of around $112.4 billion. In a high interest-rate environment, Tether has strategically invested most of its reserves in US Treasury bills and other securities, reaping substantial profits. The company ensures 100% reserve backing for USDT, with an additional 6% cushion taken from profits to facilitate smooth redemptions.
Tether’s profitability has been noteworthy, with a reported profit of $4.5 billion in the first quarter, as per the data from third-party attestations rather than full financial audits. Tether plans to channel a portion of its profits into various deals with the aim of expanding its distribution network and investing in infrastructure in emerging markets.
A notable example is Tether’s recent $18.75 million investment in XREX Group, a regulated blockchain-enabled financial institution. This investment aims to drive innovation and support USDT-based cross-border payments in these markets.
Moreover, a significant part of Tether’s investment strategy involves AI. The company has already invested more than $1 billion into the sector, such as by supporting data center operator Northern Data Group. Ardoino told Bloomberg:
“We can offer AI computing to all the companies we have invested in. It’s all about investing in technology that helps with disintermediation with traditional finance. Less reliance on the big tech companies like Google, Amazon, and Microsoft.”
Despite past regulatory challenges, including settlements with the New York Attorney General and the Commodity Futures Trading Commission in 2021, Tether has managed to maintain the USDT’s value pegged to the dollar. The elevated interest-rate environment has significantly contributed to Tether’s profitability in recent years.
This cautious approach contrasts sharply with the fate of TerraUSD (UST), another stablecoin that collapsed in May 2022. TerraUSD’s failure was attributed to its inability to maintain its pegged value, leading to a crisis of confidence and a bank run-like phenomenon.
“You can imagine that the news that Tether is making good money went around the world. We get tens or hundreds of deals per month that are on the table, and we only end up doing a very small percentage of that,” Ardoino stated.
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