USDT issuer Tether Holdings Ltd is investing in its AI division, which is worth a huge sum of more than $1 billion.
Tether Holdings Ltd, a prominent entity in the cryptocurrency sector and the issuer of the USDT stablecoin is preparing to embark on a significant investment binge. Tether Investments is poised to invest over $1 billion in various transactions within the next year, as per CEO Paolo Ardoino.
The investment arm is not confining itself to a single sector, as it has a team of 15. Ardoino disclosed that the organization evaluates hundreds of proposals monthly, particularly on startups. Their interests include biotechnology, artificial intelligence (AI), and alternative financial infrastructure for emerging markets. Tether has invested approximately $2 billion in these sectors over the past two years.
Tether’s Financial Strength
USDT, Tether’s stablecoin, is pegged to the US dollar and has a market capitalization of approximately $112.4 billion. Tether has strategically invested most of its reserves in US Treasury bills and other securities to generate substantial profits in a high-interest-rate environment. The company guarantees a 100% reserve backing for USDT, with an additional 6% cushion removed from profits to facilitate smooth redemptions.
Tether’s profitability has been noteworthy, with a reported profit of $4.5 billion in the first quarter, per data from third-party attestations rather than complete financial audits. Tether intends to allocate a portion of its proceeds to various transactions to expand its distribution network and invest in infrastructure in emerging markets.
A notable example is Tether’s recent $18.75 million investment in XREX Group, a regulated financial institution facilitated by blockchain technology. This investment aims to facilitate USDT-based cross-border remittances and foster innovation in these markets.
Additionally, AI constitutes a substantial component of Tether’s investment strategy. The company has already allocated over $1 billion to the sector, including assisting Northern Data Group, a data center operator. Arduino disclosed to 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.”
In 2021, Tether maintained the USDT’s value anchored to the dollar despite previous regulatory challenges, such as settlements with the New York Attorney General and the Commodity Futures Trading Commission. In recent years, the elevated interest-rate environment has substantially influenced Tether’s profitability.
This cautious approach starkly contrasts the demise of TerraUSD (UST), another stablecoin, which occurred in May 2022. TerraUSD’s failure was attributed to its inability to sustain its pegged value, which resulted in a bank run-like phenomenon and a crisis of confidence.
“It is conceivable that the news that Tether is earning a substantial profit spread worldwide.” Ardoino stated, “We receive tens or hundreds of deals each month that are on the table, and we only manage to execute a small fraction of them.”
