Tether set a policy to buy bitcoin with up to 15% of realized profits

Tether International Limited announced on May 17, 2023 that it would regularly allocate up to 15% of its net realized operating profits to purchases of bitcoin, beginning in May 2023. The policy created a recurring route through which earnings from the company’s reserve portfolio could become direct demand for BTC.

The development mattered because Tether managed the assets associated with USDT, a central dollar-linked instrument in cryptocurrency trading and settlement. Changing how the issuer deployed profits therefore had consequences beyond an ordinary corporate treasury decision: it connected the financial performance of a stablecoin business to the price risk and potential returns of bitcoin.

What Tether committed to

The policy applied to net realized operating profits, not to 15% of revenue, total reserves, outstanding USDT or unrealized gains. Tether defined realized gains as proceeds recognized through a sale or when an investment matured. An increase in the quoted value of an asset that remained unsold would not enter the calculation under the announced framework.

The words “up to” were also material. They established a ceiling rather than a guaranteed allocation. Tether did not disclose a fixed purchase date, minimum amount, execution venue, reference price or formula that would allow observers to calculate future buying from public data.

Tether said it would control the private keys associated with its bitcoin rather than employ a third-party custodian. It also said existing and future BTC holdings were not expected to exceed what it called the shareholder capital cushion. Those were company representations about custody and risk limits; the May 17 announcement did not provide wallet addresses or an independent custody verification.

The approximately $1.5 billion of bitcoin Tether reported holding at the end of March 2023 predated the new policy. That balance should not be described as purchases made under the May 17 program, and the announcement did not establish that any additional transaction had already occurred.

The balance-sheet context

Tether’s May 10 disclosure of its first-quarter assurance report listed at least $81.833 billion of consolidated assets and $79.390 billion of consolidated liabilities as of March 31, 2023. The difference was approximately $2.443 billion, described by Tether as excess reserves. The company also reported $1.48 billion of net profit for the first quarter.

Bitcoin accounted for approximately $1.5 billion of the reported assets. Dividing that rounded amount by the reported total produces about 1.8%, a Coinburn calculation consistent with Tether’s description of bitcoin as roughly 2% of reserves. Because the bitcoin figure was rounded, the percentage is only approximate.

The assurance engagement addressed a management-prepared reserves report at the March 31 measurement date. It was not a continuous audit of balances through May 17, did not disclose the number of bitcoins held, and did not independently verify that the newly announced purchasing policy would be followed.

Why the distinction mattered

Tether presented bitcoin as a way to diversify and strengthen its reserves. That characterization was the issuer’s position, not an independently established outcome. Bitcoin could appreciate, but its dollar value could also decline sharply, reducing the reported value of the cushion intended to absorb volatility.

Using realized profits rather than token liabilities narrowed that risk in the announced design. Nevertheless, the strength of the protection depended on the size of the cushion, purchase prices, subsequent bitcoin performance and Tether’s other assets and obligations. None of those variables could be projected from the 15% ceiling alone.

The defensible conclusion on May 17 was therefore limited but consequential: Tether had adopted a recurring bitcoin-allocation policy and already reported substantial BTC exposure. The public record did not yet establish the size, timing or market effect of purchases made under the new framework.