Author: lvan Wu on Blockchain

In recent years, stablecoins have become the core infrastructure of the global crypto financial system, and their largest issuer, Tether, has sparked widespread discussion due to a rumor — the company is reportedly seeking a financing valuation of about $500 billion, surpassing OpenAI and ByteDance, and entering the ranks of the world's most valuable private companies. This valuation has triggered controversy in both the capital markets and the crypto industry: Tether's extraordinary profitability, driven by high-yield assets, indeed showcases impressive earnings, but its business model is highly correlated with the macro interest rate environment, regulatory landscape, asset transparency, and market structure. This article will analyze the realistic support and potential concerns of this valuation from five perspectives: revenue, asset structure, market share, regulatory risk, and horizontal valuation.

Revenue and Profit

As the issuer of the USDT stablecoin, Tether has achieved remarkable profitability in recent years through interest income. With global interest rates rising, Tether has invested a significant portion of the US dollar reserves exchanged by users into low-risk assets such as U.S. Treasury bonds, thereby obtaining substantial interest income. Reports indicate that Tether achieved approximately $13.4 billion in profit in 2024, primarily from the interest income of its large holdings of U.S. Treasury bonds. This profit scale not only far exceeds that of most companies in the crypto industry but also ranks it among the leaders in the internet technology sector.

In comparison, OpenAI's valuation soared to $80-90 billion in 2023-2024, but its revenue scale remains small, primarily relying on licensing and subscriptions for its AI models, and is still in the investment phase with limited profitability (its valuation has now risen to $300 billion and may reach $500 billion, reflecting more of a bet on future growth). ByteDance's valuation is in the range of $250-300 billion, with reported profits of about $40 billion in 2023, spanning multiple fields such as short videos, advertising, and e-commerce, supported by massive revenue and profits. Meanwhile, Circle, the issuer of the USDC stablecoin, plans to have a valuation of only about $9-10 billion at its IPO in 2024, with projected revenue of about $1.68 billion and a net profit of only $156 million in 2024, making it incomparable to Tether.

From a profitability perspective, Tether's current profits are far higher than those of OpenAI and Circle, approaching or even exceeding some traditional tech giants, but its business model is also highly dependent on external factors: interest rate levels and stablecoin demand. Tether does not pay interest to users and has almost no other major sources of income, which means that the current substantial interest income is cyclical. Once global interest rates fall to low levels, Tether's interest income will shrink significantly, and its profitability may not return to current levels. Additionally, the growth potential and trading volume of the stablecoin market will also affect Tether's revenue. In contrast, OpenAI and ByteDance's valuations are more based on long-term growth expectations driven by technological innovation or user scale, while Tether's high valuation requires investors to believe that its current profit levels are sustainable or even continue to grow. Therefore, from the perspective of revenue and profit alone, assigning Tether a valuation of $500 billion carries a certain degree of recklessness, necessitating consideration of the sustainability of profits.

Asset Structure

To assess whether Tether's valuation is reasonable, it is essential to examine its asset-liability structure and risk status. According to Tether's regularly disclosed reserve reports, its reserve assets primarily consist of highly liquid, low-risk assets. As of the end of 2023, Tether claimed that nearly 90% of its reserves were composed of cash and cash equivalents, including short-term U.S. Treasury bonds, overnight and term repurchase agreements, and money market funds. Tether has completely eliminated risk assets such as commercial paper and instead holds a large amount of high-rated securities. Specifically, some analyses indicate that Tether holds over $100 billion in U.S. Treasury bonds, approximately 82,000 bitcoins (valued at about $5.5 billion), and 48 tons of gold reserves to enhance asset diversification. At the same time, Tether has also engaged in some external lending and other investments, but as of the end of 2023, its excess reserves of about $5.4 billion are sufficient to cover all such lending risk exposures. In other words, even after deducting this portion of risk assets, Tether's assets still fully cover its liabilities, with considerable margin as a buffer.

The high transparency of reserves also enhances market confidence. Tether currently issues audit-level assurance reports through independent accountants (such as BDO) every quarter, disclosing asset composition and reserve balances. This transparency has been lacking in the past — Tether has faced criticism for insufficient historical disclosures and was fined by regulators in 2021 for misleading statements. However, recent reports indicate that Tether's reserve quality has significantly improved and has undergone actual demand testing: under normal circumstances, Tether is capable of meeting large-scale redemptions from users, as its substantial holdings of U.S. Treasury bonds and repurchase agreements can be quickly liquidated. Statistics show that Tether successfully handled redemption demands of up to $21 billion during the downturn of the crypto market in 2022 while maintaining payouts.

Of course, Tether is not without risks in its asset structure. First, although Tether's holdings of bitcoin and gold have brought some income to the company (the price appreciation of these assets has contributed considerable unrealized profits to Tether), they are considered risk assets, and in extreme cases, value fluctuations may impact Tether's net asset value. Second, while Tether's transparency has improved, it has not undergone a comprehensive public audit, and external trust in its reserves is primarily based on assurance reports and the company's reputation, which differs from publicly listed companies that undergo strict regulatory audits. Third, Tether's assets are highly concentrated in U.S. Treasury bonds, which benefits from the backing of the U.S. government's credit but is also correlated with the trends in traditional financial markets and the U.S. debt situation. If the U.S. Treasury bond market experiences severe fluctuations or liquidity tightens, Tether's assets will also come under pressure. It is worth mentioning that U.S. Treasury officials recently stated that due to the government's need to issue a large number of bonds for financing, large stablecoin issuers have become significant buyers of U.S. debt. In a sense, Tether has integrated into the traditional financial system, which reflects its strength but also means that its fate is partially tied to it.

Overall, Tether's asset-liability situation is currently relatively robust, with sufficient safety margins. This provides a certain foundation for its high valuation — after all, a massive market value must be supported by real assets. However, we should also recognize that its asset allocation strategy and transparency need to be continuously maintained or even improved to sustain market confidence in its high valuation over the long term.

Competitive Position and Market Share

Tether's leading position in the stablecoin market is indisputable. USDT currently holds the largest share of the stablecoin market. As of the third quarter of 2025, the market capitalization of USDT accounts for about 59% of all dollar-pegged stablecoins, firmly maintaining its first position. According to the latest data, the circulating supply of USDT has reached approximately $172 billion, while the second-ranked USDC (issued by Circle) has a market capitalization of about $74 billion, less than half of USDT's. USDT boasts a massive user base, with global users reportedly close to 500 million. In areas such as crypto exchanges, cross-border remittances, and over-the-counter trading, USDT has long played the role of a "digital dollar," serving as the foundation of liquidity in the crypto market.

However, Tether's leading position is also being challenged and eroded by competitors. USDC, its main competitor, has consistently emphasized compliance and transparency advantages. After experiencing turmoil in the banking sector in 2023 (with some reserve banks' deposits being affected), USDC's market capitalization temporarily declined, but it has seen some recovery in 2024-2025. According to Circle, since the U.S. legislation clarified the regulatory framework for stablecoins (such as the "Genius Act"), institutional demand for USDC has significantly increased, with USDC's circulation growing by 90% year-on-year in the second quarter of 2025, and over $12.3 billion in new funds flowing in during the third quarter, bringing its market share back to about 25%. This indicates that in a clearer regulatory environment with increased participation from traditional finance, compliant stablecoins have a latecomer advantage.

In addition, emerging stablecoin projects are continuously emerging, further dividing market share. FDUSD (First Digital USD) is a stablecoin headquartered in Hong Kong, emphasizing regulatory compliance and transparency, gradually rising in the Asian market, especially benefiting from Hong Kong's friendly policies. USDe is an interesting new entrant — a synthetic dollar stablecoin launched by Ethena Labs. It is not directly backed by fiat currency deposits but maintains a 1:1 peg through a mechanism of hedging with crypto assets and derivatives. Notably, USDe has seen a rapid scale increase in a short time: in just the third quarter, it netted an increase of about $9 billion in market capitalization, becoming the third-largest stablecoin in the market with about 5% market share. Additionally, between 2023 and 2025, there have been some special-purpose or institution-issued stablecoins, such as PYUSD launched by PayPal (a payment giant entering the space, aiming to connect crypto payments), and a new stablecoin launched by MakerDAO (possibly an upgraded version of the decentralized stablecoin DAI), which reportedly each gained over $1 billion in circulation in a short time.

The changes in the market landscape mean that while Tether is large, it is not without challenges. USDT faces several concerns in the competitive landscape of stablecoins:

In terms of product substitution and innovation, if a stablecoin can significantly surpass USDT in trust and convenience (for example, being fully compliant and globally accepted, or being more decentralized and censorship-resistant technologically), USDT's leading position may be shaken. The strong comeback of USDC and the rise of USDe both indicate that there are gaps in the market that can be filled.

Regarding policy impact, if major countries/regions lean towards using local compliant stablecoins (for instance, the U.S. may promote institutions to use regulated USDC or bank-issued stablecoins), then Tether's space in the compliant market will be compressed. For example, BUSD (Binance USD) was once the third-largest stablecoin by market capitalization, but due to regulatory actions halting new issuances by its issuer Paxos, BUSD rapidly shrank and delisted in 2023, serving as a typical case of policy risk impacting market dynamics.

Moreover, USDT also faces competition from diverse scenarios within the same track. Stablecoins circulate not only on exchanges but also in cross-border trade, DeFi lending, and other areas, where different stablecoins may have their own advantages. If Tether fails to timely expand into new scenarios, other stablecoin projects that better understand local needs or possess stronger technology may capture market share.

Nevertheless, Tether also has its competitive advantages. First, USDT has the strongest network effect, the most extensive trading pairs, and the best liquidity, making it difficult for new coins to completely replace USDT's role. Second, the brand recognition and usage habits that Tether has built over the years globally (especially in emerging markets in Asia-Pacific and the crypto trading field) will not easily dissipate. Furthermore, Tether is actively positioning itself, such as promoting multi-chain issuance and connecting with payment channels in various countries, to solidify its market position. Overall, in terms of competition, Tether's $500 billion valuation implies that the market believes it can continue to dominate the stablecoin ecosystem and withstand competitive pressures. If its market share is significantly diluted or growth stagnates in the future, this valuation logic will also be shaken.

Regulatory and Compliance Risks

A key factor influencing Tether's valuation is the regulatory environment. In the past, Tether has faced multiple questions and even penalties regarding transparency and compliance issues. In 2021, Tether reached settlements with the New York Attorney General's Office and the Commodity Futures Trading Commission (CFTC) for making misleading statements about its reserve asset composition, resulting in fines of tens of millions of dollars. Regulatory investigations found that Tether sometimes did not maintain 100% reserve coverage in its early days, raising market concerns about its solvency. Although Tether has since improved its information disclosure, it has not completely eliminated external doubts — some critics argue that only a comprehensive audit can prove the true reliability of Tether's reserves, but Tether has not conducted a thorough audit, citing complex corporate structures and the inability to disclose sensitive information.

As a global financial center, the U.S. regulatory direction regarding stablecoins will directly impact Tether's operational prospects. In recent years, U.S. regulators have employed indirect strategies against Tether, such as cutting off its banking channels and investigating its partners, since Tether's entity is not based in the U.S. However, as the scale of stablecoin usage expands, the U.S. is attempting to legislate stablecoin issuance directly. Between 2023 and 2024, the U.S. Congress discussed the "Stablecoin Regulatory Act" multiple times, requiring any stablecoin issuer targeting U.S. users to possess qualifications such as registration or a banking license. In mid-2025, the U.S. passed the "Genius Act," clarifying the legal status and regulatory requirements for stablecoins as payment tools. This favorable development has led to increased institutional funding attention for compliant stablecoin companies, including Circle. For Tether, this presents both opportunities and pressures: the opportunity lies in the potential to operate more transparently as a compliant operator once regulations are clarified; the pressure is that Tether must comply with new regulations to participate in the U.S. market. Tether has not remained passive. In September 2025, Tether announced plans to issue a new U.S. dollar stablecoin "USA₮" regulated by the U.S. and appointed a former cryptocurrency director from the White House to lead the subsidiary. This indicates Tether's intention to create a compliant entity to meet regulatory requirements. If this plan succeeds, Tether may be able to meet the compliance needs of the U.S. market without abandoning its core business. However, in the eyes of regulators, Tether's past compliance record and overseas background may still be concerns; even with a new license, whether it can gain the complete trust of U.S. authorities and mainstream financial institutions remains to be seen.

Outside the U.S., the European Union has passed the MiCA regulation (Market in Crypto-Assets Regulation), which also sets capital, liquidity, and reporting requirements for stablecoin issuance. MiCA will gradually come into effect between 2024 and 2025, at which point unregistered stablecoins will not be able to circulate legally in the EU. If Tether wishes to remain unaffected in the European market, it may need to establish a subsidiary in the EU and accept regulation, which would increase compliance costs and transparency requirements. In Asia, regions like Hong Kong and Singapore are also formulating their own stablecoin regulatory guidelines. For example, the Hong Kong Monetary Authority plans to require stablecoin issuers to be licensed in Hong Kong and meet reserve management standards. Some countries and regions, including mainland China, strictly limit domestic residents' use of foreign stablecoins, which restricts Tether's growth potential in certain markets.

Due to Tether's widespread use globally, law enforcement agencies in various countries have increased their scrutiny of it. For instance, the U.S. Department of Justice has reportedly investigated whether Tether is involved in bank fraud, money laundering, and other issues. If any significant judicial charges or lawsuits arise in the future, they could directly shake market confidence in USDT. Additionally, stablecoins have already been drawn into geopolitical games: the U.S. may target stablecoin issuers that "do not cooperate in freezing illegal funds" to maintain the effectiveness of financial sanctions. In contrast, Circle and others are willing to cooperate in freezing assets on sanctioned addresses, while historically, Tether has been more restrained in such cooperation (though there have been precedents for freezing specific illegal addresses). This difference may lead to policy preferences: regulators are more supportive of controllable stablecoins and remain wary of offshore entities like Tether.

Stablecoins have become a critical systemic node in the crypto market; if a leading enterprise encounters problems, it could trigger a chain reaction throughout the market. Therefore, regulators are particularly concerned about whether Tether could pose systemic risks. Many financial officials have repeatedly emphasized that stablecoins require strict regulation to prevent runs and shocks. In this atmosphere, if Tether wants to achieve a valuation of $500 billion, it must convince investors that it will not easily collapse due to regulatory crackdowns or credit crises. On one hand, Tether has actively improved its compliance image in recent years, such as cooperating with judicial authorities to freeze USDT funds involved in crimes and collaborating with law enforcement in various countries. On the other hand, its parent company iFinex's past involvement in the Bitfinex exchange hack and its history of dealing with the banking system are often brought up. These factors may all be discounted in valuation discussions.

In summary, regulatory and compliance risks are the biggest variables hanging over Tether. Compared to other high-valuation companies, Tether operates in an industry with more regulatory uncertainties: OpenAI primarily faces competition and ethical risks, ByteDance faces geopolitical scrutiny risks, while Tether must confront the possibility that financial regulation directly impacts its existence. When assessing the $500 billion valuation, this factor must be appropriately discounted. Otherwise, solely valuing based on current profit multiples while ignoring the potential for regulatory black swan events may be a disregard for risk.

Horizontal Valuation Comparison

Comparing Tether's potential valuation with several benchmark companies helps analyze whether the $500 billion figure is reasonable:

OpenAI, as a unicorn in the field of artificial intelligence, completed a funding round led by SoftBank in March 2025, achieving a valuation of $300 billion. Subsequently, according to reports from Reuters and other media, the company is negotiating the sale of employee secondary equity, which could push its valuation to around $500 billion. OpenAI's valuation is based on expectations of its future disruptive technology. Although its revenue is expected to be only in the tens of billions in 2024, the capital market assigns it a very high multiple due to its leading position in general artificial intelligence and potential network effects. In contrast, Tether's technological barriers and innovative imagination are limited, and its main business model is relatively traditional (earning interest spreads). If we look solely at revenue/profit multiples, OpenAI's current valuation is far higher than Tether's (OpenAI's profit is nearly zero while its valuation is in the hundreds of billions), but that is a bet on future growth. Tether's $500 billion valuation seems to imply that the market believes its existing business is already very mature and stable, which is a different expectation from OpenAI's high-growth logic.

ByteDance is one of the largest unicorn companies in the world by revenue, with a valuation range of about $250-300 billion in 2023-2024 (the latest internal employee trading valuation is about $330 billion). Its valuation is supported by a massive user ecosystem (TikTok, Douyin, etc.) and considerable profitability. Reports indicate its net profit in 2023 was about $40 billion, with revenue expected to exceed $150 billion in 2024. Even so, due to political risks such as U.S. bans, ByteDance's valuation multiple is not particularly high; $330 billion is only about 8 times its annual profit, and less than one-fifth of the market capitalization of similar listed company Meta. In comparison, if Tether is valued at $500 billion, based on its projected profit of about $1.3 billion in 2024, the price-to-earnings ratio would exceed 37 times — this multiple is already close to or exceeds that of many rapidly growing tech companies. Considering that Tether's business growth rate is not as high as that of internet companies (the annual growth rate of stablecoin demand is far lower than the growth of social media users), such a high multiple seems to lack traditional justification. More importantly, ByteDance's case illustrates that even if a company's performance is impressive, regulatory and political risks can still lead investors to assign a lower risk premium. Similarly, the regulatory uncertainty surrounding Tether should logically lower its valuation expectations, rather than reflect a "zero risk" or "enjoying policy dividends" situation as some optimistic forecasts suggest.

Circle (USDC), as Tether's most direct comparable company, is seeking to go public in 2024, with a market valuation of about $9-10 billion, far lower than Tether. This is due to Circle's much smaller business scale: its total revenue in 2024 is only $1.68 billion, with net profits in the millions; USDC's market capitalization is also less than half that of USDT. Of course, Circle adopts a highly compliant development model, and its long-term growth potential and profit model differ from Tether's; for example, Circle has service income from blockchain payment and cross-border settlement in addition to interest income. Currently, the market seems to recognize Tether's straightforward ability to capture profits through interest spreads, while overlooking the costs Circle incurs for compliance (such as sharing interest with banking partners and reserve custody fees). However, if compliance becomes a decisive factor in the stablecoin industry, Circle's potential for valuation increase may actually be higher, as it faces almost no regulatory obstacles. In contrast, if Tether cannot overcome compliance challenges, even if its current valuation is high, it may shrink with policy changes.

Placing Tether within a broader company valuation context, a $500 billion valuation is almost comparable to some of the largest private companies globally: for example, Elon Musk's SpaceX is valued at about $400 billion in mid-2025; it is even close to the market capitalization levels of listed tech giants like Alibaba and Tencent. This means that if the market truly assigns such a price to Tether, it implies that it is considered to hold a position in the global business community comparable to those companies that possess cutting-edge technology or large user platforms. Many analysts are skeptical about this — after all, the issuance of stablecoins is essentially more like a financial service or quasi-banking business, rather than an internet/AI business with high technological barriers and explosive growth potential. The highest-valued institutions in traditional finance rarely reach a scale of $500 billion. Therefore, from a financial industry perspective, Tether's valuation has already exceeded that of most banks and financial service companies.

In summary, one might ask: what justifies Tether being viewed as comparable to OpenAI and surpassing ByteDance?

As mentioned earlier, Tether currently has substantial profits; if the market believes that this profitability is not only sustainable but can further increase with the growth of stablecoin usage, then assigning a tech giant-like valuation multiple may make sense. Based on an annual profit of $13.4 billion, a $500 billion valuation would imply a price-to-earnings ratio of about 37 times, which, while high compared to traditional banks, is not uncommon for some growth-oriented tech companies. If Tether can steadily expand USDT issuance each year and enter more fields (such as payment settlement, tokenization of securities, etc.), its profitability may have significant growth potential, thereby justifying a high valuation.

Stablecoins have long been an indispensable infrastructure in the crypto market and certain cross-border transactions, with Tether holding a monopolistic dominant position within it. In a sense, USDT is the "reserve currency" of the digital asset world. This status itself carries enormous strategic value, akin to Visa's position in traditional payments. If investors view USDT as one of the core pillars of the future digital financial system, then it is understandable that they would be willing to assign it a relatively high valuation. Additionally, Tether executives have hinted that this round of financing will be used to expand into new business lines such as artificial intelligence, commodity trading, energy, communications, and media. If Tether successfully leverages its capital and influence in the crypto space to develop across sectors, the imaginative potential would indeed be greater than that of merely issuing stablecoins.

It is important to note that the strongest doubts regarding the $500 billion valuation stem from the neglect of risk factors. Optimistic valuations often assume everything will go smoothly, but the reality is that Tether's potential risks are much higher than those of typical tech companies. As mentioned earlier, any one of regulatory crackdowns, interest rate shifts, competitive encroachment, or credit events could significantly impact Tether. The valuation discount case of ByteDance clearly shows that the market considers risks and adjusts valuations accordingly. Therefore, a more cautious valuation approach should apply a discount to Tether's fundamental earnings to cover potential risk losses. If Tether were valued at a more conservative multiple, such as 15-20 times earnings, its corresponding market value would be around $200-270 billion. This may be closer to its "reasonable valuation range."

Conclusion

Considering various factors such as revenue, assets, competition, and regulation, Tether's pursuit of a $500 billion valuation for financing is a highly scrutinized and controversial event. This valuation certainly reflects the market's recognition of Tether as a leader in stablecoins and its astonishment at its recent massive profits, but from a rational perspective, we need to remain cautious:

On one hand, Tether currently demonstrates excellent financial performance, with profit levels surpassing many world-class companies, and its stablecoin plays a foundational role in the crypto economy, possessing a certain degree of monopoly. These factors provide a basis for a high valuation. Looking ahead to the next few years, if the crypto market continues to expand and stablecoins are adopted more widely, Tether's business scale and profitability may further increase. Additionally, Tether's proactive strategy for diversified development (such as entering AI and energy sectors) could provide the company with new growth momentum if successful. Therefore, from an optimistic perspective, the $500 billion valuation represents a potential valuation for Tether to become a "digital finance giant" in the future.

On the other hand, the potential risks and uncertainties make this valuation appear aggressive. Tether's profitability is extremely sensitive to the macro interest rate environment, and the current interest bonanza cannot last forever. Once external conditions change, Tether's profitability may be significantly impacted. A greater concern lies in regulatory constraints — as analyzed in detail earlier, major economies are tightening regulations on stablecoins, and Tether's ability to successfully navigate compliance hurdles directly determines its future survival and growth space. The $500 billion valuation implies an assumption that Tether will smoothly resolve regulatory risks, but this is not a certainty in reality.

Overall, Tether's pursuit of a sky-high valuation that surpasses OpenAI and ByteDance is a bold exploration of the capital market's outlook for leading companies in the crypto space. It reflects both market confidence and enthusiasm, while also revealing divergent risk preferences among investors. When assessing whether this valuation is reasonable, we should maintain a rational balance: recognizing Tether's strong current performance and strategic ambitions while not overlooking the unique risks inherent in its industry. Whether the $500 billion valuation is reasonable ultimately depends on Tether's ability to prove that its profit model is robust and reliable in the long term and to successfully mitigate external risks affecting its business. Only then can the lofty valuation transition from skepticism to self-fulfillment; otherwise, market enthusiasm may fade quickly, and the high valuation will be difficult to sustain.

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