Tether Cuts Treasury Bond Purchases 90% in Q2 2025 Amid Portfolio Diversification

Tether Operations Limited, the world’s largest stablecoin issuer, drastically reduced its purchases of U.S. Treasury bonds in the second quarter of 2025. The company bought just $7 billion in Treasuries, a near 90% drop from the $65 billion it acquired in the first quarter of the same year. Despite this decline, Tether continues to maintain a total of $162.5 billion in assets to back its USDT stablecoin, with $105.5 billion in direct U.S. Treasury holdings and $24.4 billion in indirect exposure through overnight reverse repurchase agreements and non-U.S. government bonds [1].

The reduction in Treasury purchases marks a significant shift in Tether’s reserve management strategy. In late 2024, the company began ramping up its Treasury acquisitions following the implementation of the European Union’s Markets in Crypto-Assets (MiCA) regulation. This trend intensified in Q1 2025, when Tether bought $65 billion in Treasury bonds, the highest amount for that quarter [1]. The sudden deceleration in Q2 reflects a broader diversification strategy, with the company reducing its non-U.S. Treasury holdings by approximately $17 billion and allocating capital to alternative investments [1].

Alternative investments, including Bitcoin, gold, and corporate equity stakes in more than 120 companies, have gained prominence in Tether’s portfolio. These moves are partly funded by interest income generated from existing Treasury holdings. Tether has also increased its exposure to blockchain, artificial intelligence, and financial technology firms, signaling a departure from the previously conservative, Treasury-centric investment approach [1].

Regulatory considerations remain a primary driver of Tether’s investment decisions. The proposed GENIUS Act in the United States, which would require stablecoin issuers to hold most of their reserves in U.S. Treasury securities, has prompted Tether to adapt its strategy in advance. The company has publicly supported the legislation and expressed confidence in its ability to comply. However, its recent shift in purchasing patterns raises questions about the long-term sustainability of its current portfolio structure [1].

The broader stablecoin sector is also adjusting to evolving regulatory landscapes. MiCA in Europe and potential U.S. legislation are creating a complex compliance environment for global stablecoin operators. These developments are pushing firms to reconsider their reserve compositions, with many opting to increase Treasury exposure voluntarily to align with emerging standards [1].

Tether’s current reserve structure includes $5.47 billion in excess reserves, meaning it holds more than the required amount to fully back its issued tokens. However, the $50 billion gap between issued USDT tokens and direct Treasury holdings could pose challenges if stricter regulatory definitions of acceptable reserves are adopted. Indirect exposure through repurchase agreements may not be sufficient under future rules, necessitating further adjustments [1].

The company’s pivot toward alternative assets suggests confidence in regulatory flexibility regarding reserve composition. Yet, if proposed U.S. legislation mandates stricter Treasury requirements, Tether may be forced to unwind non-Treasury positions that conflict with compliance obligations. This highlights the delicate balance between diversification and regulatory adherence in the stablecoin industry [1].

Tether’s strategic shift from a high-purchase Treasury regime to a more diversified investment approach underscores the evolving dynamics of stablecoin reserve management. As the company continues to expand its holdings in digital assets, precious metals, and corporate equity, it is navigating a complex regulatory environment while maintaining its position as the leading stablecoin issuer [1].

Source: [1] Stablecoin Giant Tether Slashes Treasury Bond Buying by Nearly 90 Percent (https://coinmarketcap.com/community/articles/688c2c759145cd2c70cc698e/)