Tether Holdings, the largest stablecoin issuer globally, is poised to close 2024 with over $10 billion in net profits, according to CEO Paolo Ardoino.
These profits stem from strategic investments in the U.S. Treasuries, gold, and other securities backing stablecoins like USDT.
This year, Tether’s market valuation surged by $50 billion, reaching nearly $140 billion. The demand for USDT, which is pegged to the U.S. dollar, skyrocketed as cryptocurrencies like Bitcoin hit record highs.
By December 2024, Tether reported that 109 million wallets now hold USDT, cementing its position as the largest stablecoin by market cap.
Traditional Finance Eyes Stablecoins Market
Banks worldwide are taking notice. Europe’s Societe Generale – Forge (SG-Forge) launched a Euro-backed stablecoin earlier this year, now available to retail investors.
Other financial giants are joining the race. Deutsche Bank-owned DWS plans to issue a Euro-denominated stablecoin in 2025, while Revolut and Oddo BHF SCA are exploring similar projects.
The Markets in Crypto-Assets Regulation (MiCA), which took effect in Europe this year, has added momentum to the trend.
By providing legal clarity for stablecoin issuance and operation, MiCA has made the European Union a fertile ground for financial institutions venturing into blockchain-based payments.
Tether’s decision to discontinue its EURt stablecoin has further opened the door for competitors. In the U.S., banks are waiting for regulatory clarity following Donald Trump November re-election into the oval office.
Visa Inc. is bridging the gap with its tokenization network for stablecoin issuance. The credit card issuer is collaborating with BBVA on a 2025 pilot project and working with banks in Hong Kong, Singapore, and Brazil.
Francisco Maroto, Head of Blockchain and Digital Assets at BBVA stated that:
“This collaboration marks a significant milestone in our exploration of the potential of blockchain technology and will ultimately help enable us to broaden our banking services and expand the market with new financial solutions.”
Standard Chartered is also making moves. In partnership with Animoca Brands Ltd. and Hong Kong Telecommunications Ltd., the bank is working on HKD-denominated stablecoins as part of a pilot program approved by the Hong Kong Monetary Authority.
Profitability Driving Adoption by Banks
Stablecoins offer banks a chance to leverage blockchain technology. Tether’s success, driven by demand for seamless payments and digital asset adoption, highlights this opportunity.
JPMorgan Chase, through tools like JPM Coin, already facilitates intra-bank transfers on its blockchain. The profit potential is undeniable.
Tether’s $10 billion windfall demonstrates the financial incentives for stablecoin issuers. Customers, too, are asking for these products, banks report.
However, stablecoins come with risks. A European Central Bank study warned that converting deposits into stablecoins could weaken liquidity ratios. U.S. banks must navigate reserve requirements and potential confusion over deposit insurance for stablecoins.
Tether’s dominance underscores the immense demand for stablecoins, but banks see an opportunity to compete. With over 109 million USDT wallets in circulation, the market is ripe for innovation.
