Tether Surpasses Major Economies as 18th Largest Holder of U.S. Treasuries
In a striking development that underscores the growing influence of cryptocurrency in global finance, Tether, the issuer of the world’s largest stablecoin USDT, has emerged as the 18th largest holder of U.S. Treasuries [1], amassing a portfolio worth $127 billion as of May 2025. This milestone places Tether ahead of major economies like Germany, South Korea, and the United Arab Emirates, highlighting the unprecedented financial clout of a crypto-native entity in traditional markets.
Tether’s Rise Above Sovereign Nations
According to data from Messari and the U.S. Department of the Treasury’s Treasury International Capital (TIC) system, Tether’s $127 billion in U.S. government debt surpasses Germany’s holdings of $101.9 billion, South Korea’s $124.2 billion, and the UAE’s $103.6 billion. For context, Germany, the world’s fourth-largest economy, is now outranked by a company rooted in the decentralized ethos of cryptocurrency. Tether’s portfolio, primarily composed of short-term U.S. Treasury bills, places it just behind Saudi Arabia ($127.7 billion) and ahead of countries like Brazil ($212.1 billion) and Norway ($187.3 billion) [2].
This achievement is particularly remarkable given Tether’s origins in the cryptocurrency sector, which was once viewed as a fringe, anti-establishment movement. By becoming a significant lender to the U.S. government, Tether is redefining the relationship between digital assets and traditional finance, positioning itself as a powerhouse that rivals sovereign nations.
Tether's Investments
Tether exemplifies this trend, with the majority of its reserves allocated to U.S. Treasuries. According to Tether’s Q2 2024 disclosures, the company held $80.9 billion in U.S. Treasury bills, comprising 68.3% of its total $118.4 billion in reserves. This includes $99.8 billion in cash and cash equivalents (84.2%), with Treasuries forming the bulk, alongside repo agreements ($12.3 billion), money market funds ($6.4 billion), and minor allocations to precious metals ($3.8 billion), Bitcoin ($4.7 billion), and other investments ($10.1 billion). This heavy reliance on Treasuries underscores Tether’s strategy to ensure USDT stability while boosting demand for U.S. government debt.
Strategic Investment in U.S. Treasuries
Tether’s massive investment in U.S. Treasuries is a strategic move to back its USDT stablecoin, which is pegged to the U.S. dollar and requires robust, low-risk assets to maintain its stability. U.S. Treasuries, considered among the safest and most liquid investments globally, are a cornerstone of Tether’s reserve strategy. The company’s focus on short-term Treasury bills ensures high liquidity, enabling it to meet redemption demands for USDT while reinforcing claims of transparency and financial stability.
This approach comes at a critical time, as U.S. policymakers are advancing stablecoin legislation to impose stricter oversight on reserve composition and auditing practices. Tether’s substantial Treasury holdings may serve as a proactive alignment with these regulatory expectations, potentially mitigating concerns about its reserve management amid ongoing scrutiny.
Purchasing U.S. Treasury Bills
U.S. Treasury bills, which form the bulk of Tether’s holdings, are accessible to a wide range of investors, from individuals to large institutions like Tether. According to the U.S. Department of the Treasury, Treasury bills can be purchased through auctions managed by the Federal Reserve Bank of New York, with a minimum purchase amount of $100 and increments of $100 thereafter. For non-competitive bids, which accept the yield set at auction, the maximum purchase is $10 million per bidder [3].
Competitive bids, typically used by large institutional investors like Tether, allow bidding on up to 35% of the offering amount, specifying a desired yield or price. These securities are issued in electronic form only and can be held until maturity or sold in the secondary market. Treasury bills are auctioned weekly for terms of 4, 6, 8, 13, 17, and 26 weeks, and every four weeks for 52-week bills, with no state or local taxes applied to the interest earned. This accessibility and flexibility make Treasury bills an attractive option for entities like Tether seeking secure, liquid assets to back their operations. For more details, visit TreasuryDirect.
Types of U.S. Treasury Securities
Tether’s $127 billion portfolio primarily consists of Treasury bills, but U.S. Treasury securities encompass a broader range of instruments, each with distinct characteristics suited to different investment goals. According to Vanguard, the three main types of Treasury securities [3] are:
Treasury Bills (T-bills): These are short-term securities with maturities of 52 weeks or less, typically issued in terms of 4, 8, 13, 17, 26, or 52 weeks. T-bills are sold at a discount and redeemed at face value, with the difference representing the interest earned. Their short-term nature and high liquidity make them ideal for Tether’s strategy of maintaining stable, accessible reserves to back USDT. T-bills are also used for portfolio diversification, offering stability to counterbalance riskier assets.
Treasury Notes (T-notes): These medium-term securities have maturities ranging from 2 to 10 years and pay interest semiannually. T-notes provide a steady stream of income and are exempt from state and local taxes, making them attractive for investors seeking predictable returns. Investors can hold T-notes until maturity or sell them in the secondary market, offering flexibility for investment planning.
Treasury Bonds (T-bonds): These long-term securities have maturities exceeding 10 years, commonly 30 years, and also pay interest every six months. T-bonds are popular for long-term investment goals, such as retirement planning, due to their reliable income stream and tax exemptions on state and local levels. Their longer maturities make them more sensitive to interest rate changes compared to T-bills.
These securities, backed by the full faith and credit of the U.S. government, are considered among the safest investments, making them a cornerstone for entities like Tether seeking to ensure the stability of their financial operations.
Money Market Funds and Stablecoins: Striking Similarities
The parallels between stablecoins and money market funds (MMFs) are becoming increasingly apparent to financial regulators and market observers. Both investment vehicles offer investors cash-like liquidity while promising stable value, and both have gravitated toward Treasury securities as their preferred collateral.
Like money market funds, stablecoins function as intermediaries that pool investor money and invest it in short-term, high-quality assets. Investors in both products expect to redeem their holdings at par value on demand. The key difference lies in regulation: while money market funds operate under strict Securities and Exchange Commission oversight with specific requirements for asset quality and liquidity, most stablecoins remain largely unregulated.
The TBAC analysis draws explicit comparisons to historical money market fund crises, noting that prime MMFs experienced devastating runs during both 2008 and 2020 when their non-Treasury holdings declined in value. "The lesson, repeated, is that a 'risk-free' investment vehicle will only behave as such when backed by actual risk-free collateral—which is short dated U.S. Treasuries," the report states. This lesson appears increasingly relevant as stablecoin operators voluntarily move toward Treasury-heavy collateral structures, mirroring the post-crisis evolution of money market funds toward government-only portfolios.
MMF vs Stablecoins
At their core, both MMFs and fiat reserve backed (FRB) stablecoins serve as short-term parking facilities for investor funds. Both instruments are pegged to maintain a stable value of approximately $1, and both rely on reserve assets to back their obligations to investors. The similarities run deeper than surface-level functionality.
Reserve Asset Structure: The largest stablecoins maintain reserve compositions that mirror those of money market funds. USDC holds 53% of its reserves in a BlackRock-sponsored money market fund, while maintaining the remainder in Treasury securities and cash. Similarly, traditional government MMFs invest primarily in Treasury bills and other government-backed securities. Even USDT, despite its more opaque structure, holds 58.5% of its reserves in U.S. Treasury bills.
Primary Market Operations: Both instruments operate with remarkably similar primary market structures. Investors can directly purchase and redeem shares or tokens from issuers, typically with same-day settlement. Account verification processes, redemption rights, and even provisions for temporary suspension of redemptions exist in both ecosystems.
Sponsor Support Mechanisms: MMFs have long relied on voluntary sponsor support during times of stress, where investment advisors step in to purchase troubled assets or provide liquidity. Stablecoins exhibit an analogous mechanism through exchange affiliations – major stablecoins often benefit from preferential treatment or enhanced liquidity on exchanges operated by their issuers or parent companies.
A Crypto Giant in Global Finance
Tether’s ascent to the top 20 holders of U.S. Treasuries is a symbolic and practical milestone for the cryptocurrency industry. A company that emerged from the decentralized ideals of blockchain is now a major player in global finance, outpacing the Treasury holdings of some of the world’s most developed economies. This development underscores the growing integration of crypto and fiat systems, with Tether acting as a bridge between the two.
Beyond its Treasury investments, Tether has expanded its financial footprint, channeling approximately $5 billion into U.S. tech firms and infrastructure since 2022 and acquiring a $100 million stake in Latin American agricultural giant Adecoagro. These moves reflect Tether’s ambition to diversify its influence across both traditional and emerging markets.
Implications for the Crypto Ecosystem
Tether’s rise as a major U.S. investor could enhance institutional confidence in stablecoins, despite lingering skepticism about its auditing practices. By aligning its reserves with highly secure assets like U.S. Treasuries, Tether may bolster its credibility and pave the way for broader acceptance of stablecoins as legitimate financial instruments. However, its dominance also raises questions about the concentration of power within the crypto ecosystem, as Tether’s financial scale rivals that of entire nations.
As Tether continues to blur the lines between decentralized finance and global markets, its role as the 18th largest holder of U.S. Treasuries marks a pivotal moment in the evolution of cryptocurrency. The company’s ability to surpass major economies like Germany signals a new era where crypto-native entities wield influence on par with sovereign powers.