Why Tether Looks More Like a Central Bank Than a Stablecoin Issuer

Key takeaways

• Tether runs a treasury and repo-heavy balance sheet, holding $181.2 billion in reserves against $174.5 billion in liabilities, leaving a surplus of $6.8 billion.

• High interest rates have turned those reserves into profit, generating more than $10 billion in interest income so far in 2025, which is uncommon for a typical cryptocurrency issuer.

• It exercises policy-style tools by freezing sanctioned wallets, transferring backed blockchains and allocating up to 15% of profits to Bitcoin.

• The central bank comparison has limits. Tether has no public mandate or backing, relies on certificates rather than full audits and relies on private counterparties.

Tether no longer looks like a simple stablecoin company. It runs a balance sheet full of short-term US Treasuries, reverse repos, gold, and even Bitcoin (BTC). It mints and redeems dollars on a large scale and can freeze addresses at the request of law enforcement.

Her latest certificate He appears $181.2 billion in reserves versus $174.5 billion in liabilities, leaving $6.8 billion in surplus and more than $174 billion in USDT in circulation. With interest rates rising, this treasury-heavy portfolio has generated more than $10 billion in profits so far in 2025, a figure more common for a financial institution than a cryptocurrency startup.

That’s why both critics and supporters say Tether acts like a private, dollar-pegged central bank for parts of the cryptocurrency economy, despite having no sovereign mandate or safety net.

Acting like a central bank: what does that mean?

In practice, Tether does four things that resemble the behavior of a central bank.

First, it issues and refunds funds on request. Verified customers mint new USDT by plugging in fiat currencies and redeem them by sending USDT back in exchange for dollars. This primary market expands or contracts supply, while secondary market trading occurs on exchanges. Actual changes in the balance sheet take place within this path and the funds are recovered.

Second, it manages reserves like a fixed income desk, holding most assets in US Treasuries and short-term repos, with some gold and bitcoin. A portfolio weighted in Treasury securities maintains liquidity and adds steady demand for Treasury bills, which bond desks now actively track when identifying major buyers of U.S. debt.

Third, they earn something like seigniorage in a high-rate environment. Users hold non-interest bearing tokens, while Tether collects interest on treasuries, Resulting At more than $10 billion in profits and $6.8 billion in excess reserves as of the third quarter of 2025. This stream of income is why the “private central bank” comparison resonates.

Finally, it uses policy-style tools such as contract functions that can freeze addresses at the request of law enforcement or sanctioning authorities. It also has the ability to add or remove blockchains, for example, Omni Finish, BCH-SLP, Kusama, EOS, and Algorand, to manage operational risks.

Although this is not sovereign monetary policy, it still represents active intervention in dollar-like assets used by hundreds of millions of people.

Did you know? Tether was originally launched as Realcoin in July 2014 and was rebranded as Tether in November of the same year. It remains one of the oldest stablecoins still in active use today.

Expansion of policy tools similar to those of the central bank

Tether is now intervening in its dollar system in ways that resemble policy tools.

On the compliance side, it can freeze addresses associated with sanctions or law enforcement actions. It’s first foot It proactively implemented a policy of freezing portfolios in December 2023, and has since used it in specific cases, such as portfolios linked to the sanctioned Russian exchange Garantex. These are issuer-level interventions that directly impact who can move dollar liquidity on-chain.

On the market operations side, Tether reserves are managed like a short-term fixed income portfolio, which is heavily weighted towards US Treasuries and reverse repos. This structure allows mint and redemption activity to be aligned with highly liquid assets that earn interest while maintaining flexibility.

In the latest Tether ratificationThis combination helped generate billions of dollars in profits and large excess reserves. These mechanisms resemble open market-style governance, although Tether remains a private issuer rather than a central bank.

Tether also defines its own operating perimeter. It added and retired blockchains to focus activity where usage and infrastructure were strongest, and stopped minting coins and beyond supports On legacy networks such as Omni, BCH-SLP, Kusama, EOS and Algorand, with redemptions continuing during the transition period.

Separately, it is diversifying reserves by allocating up to 15% of generated operating profits to Bitcoin, a policy introduced in 2023 that represents another issuer-level decision with system-wide implications.

From stablecoin issuer to infrastructure player

Over the past 18 months, Tether has transformed from a single token company into a broader financial infrastructure outfit.

In April 2024, it was reorganized into four operating divisions: Tether Finance, Tether Data, Tether Power, and Tether Edu. These divisions manage Tether’s digital asset services, data and AI projects (such as Holepunch and Northern Data), energy initiatives and educational programs. The restructuring formalized a strategy that extends beyond USDT issuance.

On the energy side, Tether has committed capital and expertise to Volcano Energy in El Salvador, a 241-megawatt wind and solar park designed to power one of the largest bitcoin mining operations in the world. The project directly supports the payment and settlement runtime. The company also ended support for many legacy blockchains to concentrate liquidity where tools and demand are strongest, a network operations decision that has ecosystem-wide implications.

To directly address the US market, Tether announced USAT (USAT), a planned US-regulated dollar token that will be issued by Anchorage Digital Bank under local rules, alongside existing offshore USDT. If it launches as described, USAT will provide Tether with a compatible internal platform, while USDT will continue to serve global markets.

Why are measurement breaks?

Importantly, Tether is not a sovereign monetary authority.

It does not set interest rates, does not act as a lender of last resort, and does not operate under a general mandate. Its transparency still relies on quarterly certifications rather than a full financial audit, although the company says it is in discussions with one of the Big Four companies about auditing its reserves.

This gap between certification and audit is one reason why critics reject the “central bank” label.

There are also concerns about the balance sheet. Tether has at times maintained a collateralized loan portfolio after previously stating it would do so reduces Such exposure. This asset class attracts scrutiny because the terminology and counterparties matter. More broadly, the company relies on private banking, custody and repos rather than sovereign backing, meaning that trust and market infrastructure remain outside its direct control.

Finally, some of the most policy-like measures taken by Tether are primarily compliance measures, such as proactively freezing addresses listed by sanctioning authorities.

Did you know? In December 2023, Tether said it had done so With help More than 140 law enforcement agencies across 45 jurisdictions have frozen $835 million linked to fraud and illegal activity.

Where Tether fits into the bigger picture

Ultimately, Tether looks less like a typical stablecoin issuer and more like a private, dollar-denominated central bank for cryptocurrencies. They expand and contract supply through large-scale minting and redemptions, hold short-term Treasuries and repos, earn billions of dollars in interest income, and can intervene in compliance actions when needed.

However, the analogy does not go further than that. There is no public mandate or backing, transparency remains dependent on certification, and its policy-like procedures focus largely on compliance rather than overall governance.

Keep an eye on reserve composition, earnings, redemptions, audit progress, and, in the US, how the USAT plan with Anchorage unfolds because this is where the story will either continue to resemble with central banks or start to diverge.