Billions of Dollars Backing Tether Are Overseen by Wall Street Firm

Tether, the most popular stablecoin in the world, is backed by billions of dollars in Treasury Bills that are managed on Wall Street. According to those familiar with the situation, Cantor Fitzgerald is assisting Tether, in managing its $39 billion bond portfolio. 

The securities are part of the $69 billion in bonds, cash, and loans that back Tether. It is the third-largest cryptocurrency by market cap and the most actively traded one by volume.

The portfolio is evidence that some Wall Street firms see opportunity in managing multibillion dollar assets backing stablecoins.

Following a string of cryptocurrency company failures in the sector, U.S. regulators informed banks last month that they would proceed with caution when considering any proposals to participate in the cryptocurrency market.

According to the most recent data from Tether, the company ended 2022 with $67 billion in reserves backing $66.1 billion Tether issued after generating $700 million in profits for Q4 of 2022.

The company reported that it no longer holds its commercial paper while reducing its loan exposure and holding $39.2 billion in bonds (59% of its portfolio). Tether’s remaining assets included billions of dollars kept in cash, precious metals, reverse repurchase agreements, money-market funds, and corporate bonds.

Cantor, a privately held international financial firm that serves as one of the largest intermediaries for Wall Street traders, has been interested in the cryptocurrency market for years. The company announced in 2017 that it would provide futures contracts based on the price of Bitcoin on a small futures exchange it manages.

By working with Cantor, Tether gains access to a company with a strong position in the Treasury Bill market. By being one of the 25 principal dealers for the U.S. Treasury Bill market, Cantor has access to direct trading with the Federal Reserve Bank of New York and the ability to underwrite the sale of U.S. government debt.