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Tether Holdings, the largest global stablecoin issuer, is poised to close 2024 with more than $10 billion in net profit, according to CEO Paolo Ardoino.
These earnings come from strategic investments in US Treasuries, gold and other securities that back stablecoins like USDT.
This year, Tether’s market valuation increased by $50 billion, reaching almost $140 billion. Demand for USDT, which is pegged to the US dollar, has skyrocketed as cryptocurrencies like Bitcoin hit record highs.
By December 2024, Tether reported that 109 million wallets now held USDT, cementing its position as the largest stablecoin by market cap.
Traditional finance looks at the stablecoin market
Banks around the world are paying attention to this. Europe’s Societe Generale – Forge (SG-Forge) launched a euro-backed stablecoin earlier this year, now available to retail investors.
Other financial giants are also 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.
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The Markets in Crypto Assets Regulation (MiCA), which came into force in Europe this year, added momentum to the trend.
By providing legal clarity for the issuance and operation of stablecoins, MiCA has made the European Union fertile ground for financial institutions to venture into blockchain-based payments.
Tether’s decision to discontinue its EURt stablecoin further opened the door to competition. In the US, banks are awaiting regulatory clarity following the re-election of Donald Trump to the oval office in November.
Visa Inc. bridges the gap with its tokenization network to issue stablecoins. The credit card issuer is working with BBVA on a pilot project in 2025 and is working with banks in Hong Kong, Singapore and Brazil.
Francisco Maroto, Head of Blockchain and Digital Assets at BBVA stated the following:
“This collaboration marks a significant milestone in our exploration of the potential of blockchain technology and will ultimately help us expand 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 that drives acceptance by banks
Stablecoin offers banks an opportunity to take advantage of blockchain technology. The success of Tether, fueled by the demand for seamless payments and the adoption of digital assets, highlights this opportunity.
JPMorgan Chase, through tools like JPM Coin, already facilitates intrabank transfers on its blockchain. The earning potential is undeniable.
Tether’s $10 billion windfall shows financial incentives for stablecoin issuers. Customers are also looking 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. US banks must navigate reserve requirements and potential confusion over deposit insurance for stablecoins.
Tether’s dominance highlights the huge demand for stablecoins, but banks see an opportunity to compete. With over 109 million USDT wallets in circulation, the market is ripe for innovation.
