Tether Boosts Gold Holdings

Tether has boosted its gold holdings to over 146 tons, a 9.5% increase in Q2, as demand for tokenized gold remains strong despite market volatility [1]. The company's net operating profit rose to $1.5 billion in the second quarter, supported mainly by returns from its US Treasury portfolio and repo operations [1]. This increase in gold holdings and profit comes as the company continues to expand its user base, adding over 30 million users globally during the quarter [1].

What drove the move

The increase in gold holdings is attributed to the company's strategy to expand its reserve portfolio, which remains concentrated in high-quality liquid assets, with US government-backed securities continuing to form the core of its holdings [1]. The company's CEO, Paolo Ardoino, stated that the demand for tokenized gold is not limited to periods when gold prices are rising, but rather buyers are using periods of market weakness to increase their ownership of physical gold through a product that is fully backed, transparent, portable, and accessible on-chain [3]. The company's excess reserves, which are the capital sitting above what's needed to back every USD₮ in circulation, fell to $4.11 billion at the end of Q2, down from the record $8.23 billion it reported just one quarter earlier [2].

The competitive picture

Tether's gold holdings are now one of the largest in the world, with the company purchasing approximately 27.1 tonnes of gold during the first half of the year, averaging 4.5 tonnes per month [3]. If Tether International SA de CV were included alongside central banks in the country rankings, with approximately 150 tonnes, that would place it third globally over the period, behind Poland and China and ahead of Kazakhstan [3]. The company's tokenized gold product, XAU₮, remains at the forefront of the tokenized real-world asset market through strict 1:1 physical backing, Swiss-vaulted reserves, regulated issuance under El Salvador's Digital Asset Issuance Law, and on-chain transparency [3].

What to watch

• The company's Q3 attestation, which will show whether the buffer stabilizes, rebuilds toward Q1's level, or continues to give ground [2]
• The outcome of Tether's Big Four audit process, which will provide more detail on the company's reserve composition and strategy [2]
• The price of gold, which will impact the value of Tether's gold holdings and the demand for tokenized gold [3]

The significance of Tether's increased gold holdings and profit lies in its ability to withstand market volatility and continue to expand its user base and reserve portfolio. The company's excess reserves, although decreased, still provide a comfortable margin for absorbing the next bout of volatility in gold or Bitcoin [2]. As the company continues to grow and expand its offerings, it will be important to monitor its progress and the impact of its strategies on the broader crypto market.