Key Insights
- •A former Citi analyst has challenged Arthur Hayes' assertions regarding Tether's insolvency risk.
- •The analyst argues that disclosed reserves do not account for a separate equity balance sheet containing investments.
- •Tether is reported to generate an annual profit of $10 billion from its treasury holdings, valued at approximately $120 billion.
Expert Explains Tether's Equity Balance Sheet Structure
Joseph, the former crypto research lead at Citigroup, has contested Arthur Hayes' analysis of Tether's financial stability in a detailed post on X. Hayes had previously suggested that a 30% reduction in gold and Bitcoin holdings would deplete equity, rendering USDT insolvent. Joseph, who spent extensive time researching Tether for Citi, identified three significant inaccuracies in Hayes' assessment.
The analyst highlighted that Tether maintains a separate, undisclosed equity balance sheet in addition to its reported reserves. Tether CEO Paolo Ardoino corroborated this, stating that the group holds approximately $30 billion in equity backing $184.5 billion in stablecoin liabilities.
Joseph's initial counterpoint focused on the distinction between disclosed assets and the company's total corporate holdings. Tether's reported reserves follow a matching philosophy to demonstrate how stablecoins are backed. However, the company operates with a separate equity balance sheet that is not publicly disclosed. Profits generated by Tether are channeled to this equity side, encompassing investments, mining operations, and corporate reserves.
This undisclosed balance sheet may hold additional Bitcoin beyond what is publicly reported. Any remaining profits are distributed to shareholders as dividends. Arthur Hayes' analysis, Joseph pointed out, was limited to disclosed reserve backing and did not consider the broader corporate financial structure.
The USDT issuer, Tether, employs a dual balance sheet approach, segregating operational reserves from corporate equity. Joseph stressed the importance of understanding this distinction for an accurate assessment of solvency risk.
Tether's Profitability Supports Significant Equity Valuation
Joseph indicated that Tether holds approximately $120 billion in U.S. Treasury securities that generate interest. These holdings have yielded an annual return of roughly 4% since 2023. This treasury interest alone generates approximately $10 billion in liquid profit annually, with minimal operational expenses.
The former Citi analyst estimated Tether's equity value to be between $50 billion and $100 billion. Reports have surfaced suggesting the company explored raising $20 billion for a 3% equity stake, implying a valuation exceeding $500 billion. However, Joseph considers this figure to be overvalued and unlikely to be realized.
Tether's strong profitability allows it to sell equity stakes to cover any potential balance sheet shortfalls. Arthur Hayes' analysis, by contrast, overlooked revenue generation and equity value, focusing exclusively on the volatility of asset prices. The substantial $10 billion annual profit stream not only supports company operations but also contributes to building additional reserves. Joseph characterized Tether as a highly profitable entity, akin to a "money printing machine," due to its treasury yield income.
Reserve Structure: A Comparison With Traditional Banking
Joseph's third point involved comparing the reserves of the USDT issuer with the fractional reserve ratios employed by traditional banks. Banks typically hold between 5% and 15% of deposits in liquid assets, with the remaining 85% or more invested in illiquid assets such as loans and securities. In contrast, Tether maintains significantly higher liquid reserve ratios than the banking sector.
While the stablecoin issuer operates under a different structure, it shares certain characteristics with banks. A key difference, however, is the absence of a lender of last resort facility from central banks, which is available to traditional banks. Despite this, Tether compensates by maintaining superior collateralization.
Arthur Hayes' comparison implied that Tether functions with a risk profile similar to a leveraged financial institution. Joseph countered this by stating that Tether's reserve composition and liquidity position surpass those of typical banking standards. The stablecoin issuer's model ensures near-complete reserve backing in highly liquid government securities. Joseph emphasized that these structural differences render Hayes' comparison to banks misleading for solvency analysis.
Paolo Ardoino Details $30 Billion Group Equity Buffer
Tether CEO Paolo Ardoino directly addressed the criticisms in a post on X. He referenced the Q3 2025 attestation, which indicated a multi-billion dollar excess reserve buffer. According to the official statement, total proprietary group equity is approaching $30 billion. This figure includes $7 billion in excess equity beyond the $184.5 billion in stablecoin reserves.
An additional $23 billion is held as retained earnings, forming the Tether Group equity component. The company's total assets are approximately $215 billion, against $184.5 billion in stablecoin liabilities. The CEO highlighted that monthly base profits, generated solely from U.S. Treasury yields, amount to $500 million. This translates to an annual treasury income of $6 billion at current rates, which supports ongoing operations.
Arthur Hayes' hypothetical scenario, which posited a 30% asset decline, fails to account for the $30 billion equity buffer. Price drops would need to surpass this equity cushion before threatening the backing of stablecoins. Both Joseph and Ardoino emphasized that Arthur Hayes' analysis omitted critical financial components of Tether's operations.