Tether's excess reserves have been slashed by half to $4.1 billion in the first quarter, yet it has pivoted to initiate private lending.

Written by: Zennon Kapron, Forbes

Translated by: AididiaoJP, Foresight News

On September 9, Tether announced the launch of StableFund in partnership with Fasanara Capital. This is a private credit fund with a total contribution of $400 million from the two founders to serve as initial capital, aiming to raise up to $3 billion from third-party institutions. Tether acts as a co-founder responsible for seeking financing opportunities related to USDT and providing stablecoin settlement infrastructure.

Note: Fasanara Capital is a global asset management company headquartered in London, founded in 2011 by Francesco Filia. It currently manages approximately $6 billion in assets and focuses on financial technology-driven private credit strategies.

The fund will lend to fintech platforms in over 60 countries, covering small business loans, consumer credit, trade receivables, and supply chain finance. The fund is registered in the Cayman Islands. However, the press release did not specify how much of the $400 million Tether contributed, and Tether has not disclosed this since.

Six weeks prior, on July 31, Tether released its reserve report for the period ending June 30. Total assets were approximately $187.75 billion, and total liabilities were about $183.64 billion. The difference of $4.11 billion is what Tether refers to as "excess reserves" — the portion of reserve assets that exceeds liabilities, serving as Tether’s cushion.

This figure was still $8.23 billion on March 31, when Tether highlighted it as a historical high in the press release title. Within one quarter, the excess reserves decreased by $4.12 billion, a drop of 50.1%. Meanwhile, liabilities changed by only $106 million during the same period.

Looking at both of these facts together warrants deeper investigation.

Why Excess Reserves Halved

Tether did not explain the reasons for the decline item by item; its press release described the quarter as "robust." But the answer lies in the report from auditing firm BDO.

Tether's reserves are not solely made up of U.S. Treasury bonds. As of June 30, the reserve assets included:

• $114.96 billion in U.S. Treasury bonds
• $25.6 billion in reverse repos
• $40.3 million in cash and bank deposits
• $18.84 billion in precious metals
• $5.8 billion in Bitcoin
• $3.76 billion in publicly traded stocks
• $5.24 billion in other investments
• $13.45 billion in secured loans

The $6.5 billion held in money market funds at the end of 2024 has been fully liquidated.

The issues stem from gold and Bitcoin. The gold price used by BDO fell from $4,668.06 per ounce on March 31 to $4,008.02 on June 30, a decline of 14.1%. Bitcoin fell from $68,200 to $58,600.

The total of gold and Bitcoin is $24.6 billion. With only $4.1 billion in excess reserves, these two assets only need to decrease by 17% to completely wipe out the excess reserves.

BDO's equity bridge data is even more visual: the group had an equity of $6.34 billion at the beginning of the year, a negative financial result of $3.17 billion for the first half, and after adding $943 million in capital, ended with $4.11 billion.

For a company whose holdings in gold and Bitcoin are six times its surplus, a 2.2% cushion means that as long as gold and Bitcoin prices continue to fall, excess reserves will be further eroded, and losses have not been fully recognized on the books yet.

Tether can cite a projected $10 billion profit in 2025 and an audited surplus of $6.814 billion to demonstrate its strength, but the direction is clear: one year ago, excess reserves constituted 3.5% of liabilities, projected to be 5.2% by the end of 2024, but now it is only 2.2%. The drop is not due to user redemptions, but rather asset devaluation.

Loans It Once Said It Would Eliminate

Looking again at secured loans — loans that Tether issues to borrowers backed by collateral.

In December 2022, following the FTX collapse, Tether promised, "from now on, throughout 2023, we will reduce secured loans in reserves to zero." At that time, the scale of such loans was $6.1 billion.

However, the reality is: one year later, it’s $4.8 billion, expected to be $8.19 billion by the end of 2024, and $17.04 billion by the end of 2025. By June 30, 2026, it will be $13.45 billion. Tether describes the reduction of $2.38 billion as a "15% cut."

The $13.45 billion in secured loans is 3.3 times the $4.1 billion in excess reserves.

BDO did not disclose the types of borrowers and collateral. Its description of the loans is "over-collateralized and monitored regularly," whereas previous reports stated "fully collateralized by liquid assets." The change in wording is noteworthy.

Excess reserves set a record in the first quarter, halved in the second quarter, while Tether is simultaneously reducing loans it pledged to eliminate three years ago. In the third quarter, it launched another lending fund.

This is not its only new lending business. Bloomberg reported this month that as of the end of June, U.S. precious metals dealer Gold.com owes Tether approximately $1.45 billion, and Tether has largely funded $1.7 billion in precious metal leases for that dealer. In November, Tether stated it had issued about $1.5 billion in commodity trade credit and plans for "significant expansion." In June, it announced with loan institution Ledn that holders of XAUT gold tokens could borrow funds later this year.

Tether’s stance is that its investments "are funded by the company's excess capital and profits, completely isolated from the USDT reserves." Secured loans fall within the reserves; the fund's investment commitment is presumably outside the reserves. But neither the StableFund press release nor the June reserve report made this clear.

The Issue is Not Concentration, but Role Conflict

Fasanara itself is not the problem. This company was co-founded by Francesco Filia in London in 2011 and manages assets exceeding $6 billion, lending through fintech initiators for a decade — the very business described by StableFund.

Even if isolation is real, every dollar Tether puts into the fund comes from group equity, and the problem will not disappear. This is due to Tether's multiple roles within this structure: it is the initiator responsible for sourcing loans; it is the advisor providing guidance to the fund holding the loans; and it also issues the funds transferred by the fund, operating on its own track.

Filia describes Tether's value as "the world’s largest stablecoin network, with a vast capital capacity, a cryptocurrency native investor base, and the USDT track." He told GTR that loans can remain in traditional currency, "the loans themselves and the fund's equity do not need to be tokenized." Tokens are simply for transferring funds.

But once issues arise with StableFund’s loans — distributed across 60 countries, involving consumer credit and small business loans, disbursed through 141 fintech initiators partnering with Fasanara — Tether has reputational reasons to support them. A company with only a 2.2% cushion making support decisions, regardless of where the funds come from, is essentially a reserve issue.

As of the 90 days ending September 22, the circulating supply of USDT has decreased by about $2.8 billion, a drop of 1.5%. This is not a run. The third quarter reserve report will show how the excess reserves performed during the same period.

Tether is Circumventing the Rules

The GENIUS Act was signed on July 18, 2025, specifying the range of reserves permitted for approved stablecoin issuers: cash, insurance deposits, U.S. Treasury securities with a remaining term of no more than 93 days, overnight repos, government money market funds, etc. The range is limited.

Section 4(a)(2) states that reserves "must not be directly or indirectly pledged, re-pledged, or reused by the approved stablecoin issuer," with only narrow exceptions. The Treasury's proposed rules on issuance were released on August 18, with comments due by October 19, and the act is expected to take effect on January 18, 2027.

Tether’s response is USAT — a separate token issued through Anchorage Digital Bank since January 27, aimed at compliance. The same press release stated USDT is "moving towards" compliance.

The act sets two key dates: Section 3(b) prohibits U.S. digital asset platforms from offering non-compliant stablecoins three years after the act is enacted (July 18, 2028); Section 18 allows foreign issuers to enter the U.S. market after the Treasury determines that their home country's system is comparable.

StableFund is precisely the structure the rules aim to prevent, merely assembled a layer outside the rules. The GENIUS Act does not prevent the parent company of a foreign issuer from initiating private credit with its own equity — it prevents reserves from being used for this. This is why the undisclosed figures — how much Tether contributed from the $400 million, and the source — are more significant than the fund’s size itself.

The commitment of stablecoin issuers is to redeem at face value. When valuation moves in the wrong direction, fulfilling that commitment relies on the surplus. And by the end of June, the surplus was $4.1 billion, half of what it was in March.

What to Watch For

The third quarter reserve report is expected to be released around the end of October, with three key points to watch:

First, whether the excess reserves recover as gold prices rise. If gold and Bitcoin rebound, the cushion may recover; if they continue to decline, the pressure will further increase.

Second, whether the secured loan project continues to decline or rises again. Tether promised to zero it out three years ago, but the actual scale has instead expanded. Whether this trend reverses is worth monitoring.

Third, whether the investment commitment of StableFund appears in the reserve report or only in the group report. This determines whether there is a firewall between this money and the USDT reserves.

In addition, two other things are worth tracking. KPMG announced on August 13 that its audit for 2025 found a surplus $476 million more than the BDO report for the same date, and Tether has not explained the basis for this, which would help if reconciled. The Treasury’s comparability determination for foreign issuers under Section 18 is a critical juncture for USDT’s entry into the U.S. after 2027, and it must answer a question: Is an issuer offering private credit through a fund providing advisory services comparable to one that is not allowed to do so?

The second quarter press release stated that reserves are robust. Perhaps so. But the significance of the cushion lies in the day when reserves are no longer robust. Tether lost half of its cushion in one quarter and responded by initiating private lending.