The world's largest stablecoin issuer, Tether, is evaluating a private placement to raise between $15 billion and $20 billion, which would account for about 3% of the company's shares. According to a report by Bloomberg on Wednesday (September 24), citing two informed sources, this deal could value Tether similarly to OpenAI.
Shortly after the report was released, Tether CEO Paolo Ardoino confirmed the news on his official X account, stating that Tether is "assessing raising funds from a group of high-profile key investors." He added that this funding would "exponentially amplify" Tether's strategic scale in existing and new business areas. These business areas include: stablecoins, distribution ubiquity, artificial intelligence, commodities, energy, communications, and media.
It is reported that this round of financing will be conducted through the issuance of new shares, without involving existing shareholders selling their stakes. However, negotiations are still in the early stages, and details, including the scale of financing, may change.
If calculated based on a $20 billion financing and a 3% equity stake, Tether's overall valuation would approach $500 billion, which would be a "milestone achievement" for a company in the crypto industry, and would mean that this crypto giant's valuation could rival that of the world's largest private companies like SpaceX or OpenAI. Earlier this year, a round of financing for OpenAI valued it at $300 billion.
Tether has previously been accused of being the "preferred cryptocurrency" for criminal activities, but under Trump's supportive stance towards the crypto industry, the company has been advancing its plans to return to the U.S. Earlier this month, Tether appointed Bo Hines as the new CEO of its U.S. operations; Hines is a key figure in the Trump administration's cryptocurrency policy and helped push for the passage of the GENIUS Act. Additionally, Tether has established a company focused on U.S. enterprises and institutions, USAT, which will be regulated under the U.S. GENIUS Act.
The market capitalization of Tether's stablecoin USDT has recently surpassed $172 billion, far outpacing its competitors. Circle, which ranks second in the stablecoin space, has a market capitalization of about $74 billion for its USDC stablecoin. However, this significant lead does not mean Tether can rest easy.
A research report released by JPMorgan previously indicated that the U.S. stablecoin market may be facing a "zero-sum game" situation, where newly issued stablecoins may only redistribute market share rather than expand the overall market. According to the report, the total market capitalization of the current stablecoin market is about $278 billion, but its share of the overall cryptocurrency market capitalization has remained below 8% since 2020.
In such an environment, competitors continue to emerge. In addition to Circle, new entrants like PayPal, Robinhood, and Hyperliquid are actively competing for market share through diversified strategic measures, posing a strong challenge to Tether.
Circle: Building an ecosystem and enhancing compliance
After the passage of the GENIUS Act in the U.S., Circle is actively responding to regulatory requirements by enhancing transparency and compliance to attract institutional clients. Additionally, Circle is developing the Arc blockchain, aimed at improving the liquidity and scalability of USDC, thereby enhancing its competitiveness in the stablecoin market.
PayPal: Leveraging traditional financial advantages to promote stablecoin adoption
PayPal launched its stablecoin, PayPal USD (PYUSD), in 2023, ensuring the transparency and security of its 1:1 dollar reserves through a partnership with Paxos Trust Company. PYUSD has been launched on mainstream blockchains like Ethereum and Solana, with plans to expand to networks like TRON, Avalanche, and Sei to enhance its applicability in global payments. Furthermore, PayPal is attracting users to adopt PYUSD by offering incentives such as holding rewards, thereby increasing its market share.
Hyperliquid: Launching USDH to challenge market dominance
Hyperliquid launched the stablecoin USDH in September, achieving over $2.2 million in trading volume shortly after its launch. The introduction of USDH marks Hyperliquid's foray into the decentralized finance space, aiming to enhance the liquidity and market influence of the stablecoin through integration with its native token economic system. Additionally, Hyperliquid is expanding the use cases of USDH through partnerships with decentralized exchanges.
Robinhood: Integrating stablecoins to enhance trading efficiency
Robinhood is exploring the possibility of launching its own stablecoin to improve trading efficiency and user experience on its platform. By integrating stablecoins, Robinhood aims to achieve 24/7 trading settlement, enhance capital utilization, and reduce trading costs. Moreover, Robinhood is expanding its business layout in the cryptocurrency space by acquiring the Bitcoin exchange Bitstamp, laying the groundwork for a future stablecoin launch.
In addition to external challenges, Tether's internal issues cannot be overlooked.
Firstly, Tether has long faced transparency issues regarding its reserves. Tether claims that USDT is fully backed by reserve assets, but it lacks continuous third-party audits and only provides quarterly reports, leaving doubts about its reserve structure and asset liquidity unresolved. Secondly, the asset allocation structure is complex and carries potential risks. Tether's reserves include not only cash and U.S. Treasury bonds but also volatile assets like Bitcoin and gold. While this diversification can increase returns, it may also bring liquidity pressure or valuation risks during market volatility. Additionally, internal governance and compliance systems still need strengthening. To meet regulatory requirements like the GENIUS Act, Tether must establish stricter fund management, auditing, and risk control processes. The current governance structure and processes have not been fully transparent or standardized, which may expose weaknesses during compliance checks or crisis events. Finally, diversified business expansion increases operational complexity. In recent years, Tether has ventured into multiple fields such as artificial intelligence, energy, and commodities, which, while aiding strategic layout, may also distract management attention and pose potential operational and risk control pressures on its core stablecoin business.
Tether plans to expand its business through private financing, with a potential valuation of $500 billion, but its leading position is not without concerns. Internally, it faces issues such as insufficient reserve transparency, complex asset structures, inadequate governance and compliance systems, and operational pressures from diversified expansion. At the same time, emerging players like Circle, PayPal, Hyperliquid, and Robinhood are seizing market share through innovation and compliance strategies. Whether Tether can solidify its dominant position in the future will depend on its internal governance capabilities and regulatory response strategies.
Related: Are traditional banks facing their "final deadline"? Tether's $500 billion valuation challenges OpenAI!
Original article: “Stablecoin giant Tether seeks $500 billion valuation: What internal and external challenges does it face?”
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