Tether to Invest Over $1 Billion in AI, Biotech, Emerging Markets in 2024

Key Takeaway

• Tether plans to invest over $1 billion in emerging markets, AI, and biotech within the next 12 months.
• The company has already invested $2 billion in these sectors over the past two years, highlighting its growing financial clout.
• Tether's USDT stablecoin maintains a market cap of $112.4 billion, with profits bolstered by high interest rates and investments in US Treasury bills.

Tether's Expansive Investment Strategy

Tether Holdings Ltd., the issuer of the world's largest stablecoin, USDT, is set to invest over $1 billion in various deals over the next 12 months, according to CEO Paolo Ardoino. Tether Investments, the company's investment arm, has a team of 15 people evaluating hundreds of pitches monthly, primarily from startups. The focus areas include alternative financial infrastructure for emerging markets, artificial intelligence (AI), and biotech. Over the past two years, Tether has already invested approximately $2 billion in these sectors.

The investment strategy underscores Tether's growing financial influence and ambition. With a market capitalization of about $112.4 billion, USDT tracks the dollar one-to-one. Tether has been investing its reserves in US Treasury bills and other securities, earning billions in profits due to the current high interest-rate environment. Despite maintaining 100% of its reserves plus an additional 6% cushion for smooth redemptions, Tether plans to allocate a portion of its profits to new investments. Ardoino emphasized the company's commitment to investing in technology that reduces reliance on traditional finance and big tech companies like Google, Amazon, and Microsoft.

Regulatory Scrutiny and Settlements

Tether's operations have not been without controversy. In 2021, the company settled with the New York Attorney General and the Commodity Futures Trading Commission over allegations related to its reserves and losses, without admitting any wrongdoing. Despite these challenges, Tether's USDT has maintained its peg to the dollar without major depegs in recent years. The elevated interest-rate environment has significantly boosted Tether's profitability, with the company reporting a $4.5 billion profit in the first quarter of this year.

The quality of assets backing stablecoins like USDT has been under intense scrutiny from regulators concerned about liquidity and the ability to withstand mass redemption requests. Third-party attestations, which Tether uses, are limited to a snapshot in time and do not provide full access to the company's books, unlike financial audits.

Expanding Beyond Stablecoins

Tether is diversifying its business beyond stablecoins, which face regulatory headwinds globally. In April, the company split into four divisions focused on finance, data, Bitcoin mining and energy, and education. Later this year, Tether plans to launch a platform for issuing bonds and equity in digital-token form and for central banks to offer central-bank digital currencies. Unlike traditional venture capitalists, Tether invests in projects it finds extremely interesting, without the expectation of immediate profitability.

Tether's investment in biotech, such as backing Blackrock Neurotech, a brain-computer interface technology company, highlights its unique investment strategy. "We are not a classic VC," Ardoino said. "We do invest in things that we care about, and we have our own strategy."

Management Quotes

• Paolo Ardoino, CEO of Tether Holdings Ltd.:

  "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."
  "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."
  "Our investment policy is investing only in projects we find extremely interesting."
  "We do invest in things that we care about, and we have our own strategy."