Tether's Excess Reserves Halved in Q1, Are Gold and Bitcoin to Blame?

Author: Zennon Kapron, Forbes

Compiled by: AididiaoJP, Foresight News

On September 9, Tether and Fasanara Capital announced the launch of StableFund. This is a private credit fund with a combined initial investment of $400 million from both parties, aiming to raise up to $3 billion from third-party institutions. Tether acts as a co-sponsor, 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, currently managing approximately $6 billion in assets, focusing on fintech-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 was contributed by Tether, and Tether has not disclosed this information since.

Six weeks ago, on July 31, Tether released its reserve report as of June 30. Total assets were approximately $187.75 billion, with total liabilities around $183.64 billion. The difference of $4.11 billion is what Tether refers to as "excess reserves"—the portion of reserve assets exceeding liabilities, equivalent to Tether's safety cushion.

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

Looking at these two aspects together, it warrants further investigation.

Why Excess Reserves Halved

Tether did not explain the reasons for the decline item by item; its press release stated that the quarter was "strong." However, the answer lies in the report from the auditing firm BDO.

Tether's reserves are not just U.S. Treasury bonds. As of June 30, reserve assets include:

• $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 money market fund previously held at the end of 2024 has been fully liquidated.

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

Gold and Bitcoin together account for $24.6 billion. With excess reserves only at $4.1 billion, a mere 17% fluctuation in these two assets could wipe out the entire excess reserve.

BDO's equity bridge data is more intuitive: the group's equity at the beginning of the year was $6.34 billion, with a negative financial result of $3.17 billion for the first half of the year. After adding $943 million in capital, the final amount left is $4.11 billion.

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

Tether can cite a projected profit of $10 billion in 2025 and an audited surplus of $6.814 billion to demonstrate its strength, but the direction is clear: a year ago, excess reserves accounted for 3.5% of liabilities, by the end of 2024 it was 5.2%, and now it is only 2.2%. The reason for the decline is not user redemptions, but asset depreciation.

Loans It Once Promised to Eliminate

Looking again at secured loans—loans issued by Tether to borrowers, secured by collateral.

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

But the reality is: one year later, it stands at $4.8 billion, projected to be $8.19 billion by the end of 2024, and $17.04 billion by the end of 2025. By June 30, 2026, it is expected to be $13.45 billion. Tether referred to the $2.38 billion reduction 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," while the previous three reports stated that they were "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 cutting down on loans it promised 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 owed Tether about $1.45 billion, with Tether providing most of the financing for $1.7 billion in precious metals leasing for that dealer. In November, Tether stated it had issued about $1.5 billion in commodity trade credit and planned to "significantly expand." In June, it announced with its invested lending institution Ledn that holders of XAUT gold tokens could borrow funds later this year.

Tether's position is that its investments "are funded by the company's excess capital and profits and are completely isolated from USDT reserves." Secured loans are within reserves; the funding commitments for StableFund are likely outside reserves. However, neither the StableFund press release nor the June reserve report clarified this point.

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, managing over $6 billion in assets, and has been lending through fintech sponsors for a decade—this is precisely the business described by StableFund.

Even if the isolation is true, every dollar Tether invests in this fund comes from group equity, and the problem will not disappear. The reason lies in Tether's multiple roles in this structure: it is the sponsor responsible for seeking loans; it is the advisor providing advice to the fund holding the loans; and it also issues the funds transferred by the fund, operating on its own track.

Filia described Tether's value as "the world's largest stablecoin network, with a huge capital capacity and a crypto-native investor base, along with 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 merely for transferring funds.

However, once issues arise with StableFund's loans—distributed across 60 countries, involving consumer credit and small business loans, issued through 141 fintech sponsors collaborating with Fasanara—Tether has a reputational reason to support them. And a company with only a 2.2% safety cushion making support decisions, regardless of which account the funds come from, is essentially a reserve issue.

In the 90 days leading up to September 22, the circulating supply of USDT decreased by about $2.8 billion, a drop of 1.5%. This is not a bank run. The third-quarter reserve report will show the performance of excess reserves during the same period.

Tether Is Skirting the Rules

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

Section 4(a)(2) states that reserves "shall not be directly or indirectly pledged, re-pledged, or reused by the permitted stablecoin issuer," with only narrow exceptions. The proposed rules from the Treasury regarding issuance were published 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 states that 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 that the rules aim to prevent, merely assembled outside the rules. The GENIUS Act does not prevent the parent company of foreign issuers from initiating private credit with its own equity—it prevents reserves from being used for this purpose. This is why the undisclosed figures—how much of the $400 million was contributed by Tether and where it came from—are more important than the fund's size itself.

The commitment of stablecoin issuers is to redeem at par. When valuations go in the wrong direction, fulfilling that commitment relies on surplus. And as of 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 excess reserves will recover with the rebound in gold prices. If gold and Bitcoin rebound, the safety cushion may recover; if they continue to decline, pressure will increase further.

Second, whether secured loan projects continue to decline or rise again. Tether promised to eliminate them three years ago, but the actual scale has expanded instead. Whether this trend reverses is worth monitoring.

Third, whether the funding commitments for StableFund appear in the reserve report or only in the group report. This determines whether there is a firewall between this money and USDT reserves.

Additionally, two other matters are worth tracking. KPMG announced on August 13 that its audit findings for 2025 showed a surplus $476 million higher than BDO's report on the same date, the basis of which Tether has yet to explain; reconciling this could be helpful. The Treasury's comparability determination for foreign issuers under Section 18 is a threshold for USDT to enter the U.S. after 2027, and it must also answer a question: does an issuer that provides advisory services to a fund initiating private credit have comparability with an issuer that is not allowed to do so?

The second-quarter press release stated that reserves were strong. Perhaps so. But the significance of the safety cushion lies in the day when reserves are no longer strong. Tether lost half of its safety cushion in a single quarter and responded by initiating private credit.

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