Tether Significantly Cuts US Bond Holdings, Raising Regulatory Compliance Concerns

In the latest quarterly report for Q2 2025, Tether's USDT holdings show a significant shift from US government bonds, decreasing from $65 billion in Q1 and $33 billion in Q4 2024 to just $7 billion. During the same period, Tether has been diversifying into assets like Bitcoin, gold, and corporate investments, while cash equivalents such as repos and non-US bonds have not increased—in fact, they have decreased by $17 billion. Currently, Tether's holdings include $105.5 billion in US bonds and $24.4 billion in indirect exposure via repos and non-US bonds. The sharp reduction in US bond purchases is surprising, especially given Tether's past strong support for the GENIUS Act, which mandates stablecoins to reserve primarily in US Treasuries. CEO Paolo Ardoino has indicated that over $50 billion USD of USDT are issued backed by these US bonds. This shift raises questions about Tether's ability to comply with the future requirements of the GENIUS Act, as moving away from US Treasuries could challenge their reserve management strategies and regulatory compliance. It suggests Tether is exploring diversification to potentially navigate evolving regulatory landscapes or optimize yields outside traditional US assets. However, this strategy could pose risks to their reputation and stability, particularly if regulators tighten standards or if market conditions affect the value and liquidity of these alternative holdings. Overall, this development signals a notable change in Tether's reserve allocation and risk management approach. Stakeholders should monitor whether this trend continues and how it impacts Tether's regulatory standing and transparency. While the reduction in US bond holdings might suggest a shift in risk appetite or strategic positioning, it also underscores the need for careful compliance management amidst regulatory pressures, especially related to the GENIUS Act. Investors and users of USDT should stay informed on these developments, as they could influence Tether's stability and regulatory relationship in the future.