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The promise of stablecoins is in the name. As bitcoin and ether rise and fall with the whims of retail investors, stablecoins are supposed to be stable. And whatever happens to its real value, we can be sure that tomorrow, one US dollar will be worth exactly one US dollar.
The Genius Act passed by Congress last summer requires US stablecoins to maintain one-to-one dollar assets as collateral. But the world’s largest stablecoin by value, USDT, does not. That’s because it’s regulated not by the US government, but by El Salvador’s National Commission of Digital Assets. Though Tether, USDT’s issuer, recently launched USAT — a separate, Genius Act-compliant coin (market cap: approximately $20mn) — it has no plans currently to bring the flagship USDT (market cap: approximately $186bn) into the US framework.
So, unbound by these rules, how are USDT’s assets invested?
Tether hasn’t been shy about this. In a recent interview with Bloomberg, CEO Paolo Ardoino described Tether as increasingly “one of the biggest […] gold central banks in the world” with gold bars stored in a Swiss former nuclear bunker that is “a James Bond kind of place”. Tether has been making bullion purchases so large that, as FTAV has reported, they probably helped underpin gold’s 64 per cent gain last year.
And Tether makes it clear that rather than just collateralising Tether Gold, its gold-backed coin, these reserves serve as part of the collateral for dollar-denominated stablecoin liabilities.
The potential is obvious for an asset-liability mismatch, but what does this mean in practice? To answer that question, we can take a look at Tether’s balance sheet.
Notably, Tether has not presented its reserves for an independent third-party audit. The figures cited above are based on a quarterly report commissioned by Tether and prepared by accounting firm BDO Italia.
Tether this week appointed KPMG as auditor and is expected to give another quarterly update on reserves in the coming days. The company did not respond to a comment request.
In its most recent report, Tether listed total assets of $192.9bn. Most of that is invested in US Treasury bills. Besides Treasuries, the balance sheet includes large allocations in low-risk assets such as repos, secured loans, and cash.
But it is the rest of Tether’s balance sheet that raises some questions. Tether holds large allocations in precious metals, bitcoin, and a small allocation into “other investments.”
As of the end of last year, Tether reported holding roughly $17.5bn in gold bars and $8.4bn in bitcoin, the latter explicitly marked-to-market at its December 31 price. This means that at the end of 2025, Tether had about 96,185 BTC and (assuming that gold is also marked to market) about 10,053 400-ounce gold bars in the bunker.
We might also look at their liabilities. Tether reports about $186.5bn in total. The company doesn’t break this number down much, but these numbers appear to be over 99.9 per cent token liabilities. And since they are elsewhere referred to as “liabilities of the company issuing fiat-denominated Tether tokens,” it seems reasonable to assume that these are dollar liabilities, not Tether Gold (which only has just over $3bn of tokens in issue anyways). For our purposes, we’ll just consider Tether’s digital token liabilities.
That leaves the equity (that is, assets minus liabilities) at $6.3bn as of the end of 2025. Since then, gold is little changed and bitcoin has slumped.
Not accounting for additional stablecoins issued or gold bars or bitcoin purchased in the first months of 2026, we could on this basis mark Tether’s gold and bitcoin holdings (which we might call their “risk assets”) at $24.7bn today.
This leaves them with equity today worth approximately $5.1bn. If the assumptions we outlined above are correct, another way to look at this would be, if the gold and bitcoin holdings were to dip tomorrow by more than $5.1bn, the equity would be worth less than zero and ceteris paribus the company would be technically insolvent.
Could this possibly happen? Likely not, but maybe.
Hypothetically, a decline in the value of Tether’s gold and bitcoin holdings by a weighted average of 20.8 per cent would push Tether to the point of insolvency. That is, if gold falls to $3,521 an ounce and bitcoin drops to $55,966. A gold sell-off could also get them there alone, if bitcoin keeps its current value and gold dips 28.7 per cent from its current level to $3,170.
These are of course some pretty big moves. So large, in fact, that in order to find gold and bitcoin at such low levels, you would have to look back as far as . . . 2024.
Tether’s dollar-liability bitcoin-and-gold-buy-and-hold strategy seems to have paid off quite well over the past few years. And it hasn’t affected demand for USDT. But as it is often said, past results do not guarantee future performance.
It is impossible to predict what would happen if gold and bitcoin drop further, but it would be foolhardy to ignore the run risk if technical insolvency is ever considered a realistic threat. Tether uses a closed-shop redemption mechanism, so for many USDT holders the secondary market determines their exit price. Irrespective of capitalisation, the dollar peg may not hold if arbitrageurs don’t have enough balance sheet capacity to absorb the selling flows, as we saw in the 2022 dash for cash.
But who are we to tell Tether what they can and cannot invest their reserves in, or tell El Salvador’s National Commission of Digital Assets to tell Tether what they can and cannot invest their reserves in? With little regulation in place, risk for USDT coinholders must fall into the category of caveat emptor.
