According to reports, the world's largest stablecoin issuer Tether is collaborating with Wall Street veteran investment bank Cantor Fitzgerald to negotiate a private sale round of up to $20 billion, with a target valuation of an astonishing $500 billion. This figure not only places Tether alongside AI giants like OpenAI and space exploration pioneers like SpaceX but also leaves people astonished by the speed of its big pump in valuation.
Looking back at November 2024, when the financial services company Cantor Fitzgerald acquired approximately 5% of Tether's shares, its valuation was only about $12 billion. This means that in less than a year, Tether's value has skyrocketed over 40 times. As the news broke, the market was shaken, and there were even reports that top investment institutions such as Soft Bank and Ark Investment Management, led by “the Queen of Stocks” Cathie Wood, were interested in acquiring shares. One can't help but wonder: Is issuing stablecoins really that profitable?
Simple yet big pump business?
To understand why Tether can have such a high valuation, we first need to break down its business model. On the surface, the stablecoin USDT is pegged to the US dollar at a 1:1 ratio, and the issuer seems to make no profit. But in reality, this is a very simple yet extraordinarily big pump “interest spread business.”
When users purchase USDT with fiat currencies (such as US dollars), Tether does not let these funds sit idle. Instead, it invests its massive reserves primarily in high liquidity, low-risk assets, the largest of which are U.S. Treasury bonds. Against the backdrop of a global interest rate hike cycle, U.S. Treasury yields have skyrocketed, making Tether, with its hundreds of billions in reserves, a giant “cash cow.” According to reports, Tether recorded an astonishing profit of $4.9 billion in the second quarter of 2025.
DeFi researchers even refer to this business as the “four cents ambition”: every dollar stablecoin in circulation can generate about four cents (calculated at a 4% yield) of passive income for the issuer each year. When this base expands to Tether's issuance of over 172 billion dollars, its annual revenue reaches tens of billions, even hundreds of billions of dollars, with a profit margin as high as 99%, leaving most tech and financial institutions around the world in the dust.
An interesting question is, since Tether's profitability is so strong, why is there a need for high-profile external financing at this time? The answer is far more complex than just “raising money”; it conceals Tether's massive capital operations and ambitious business expansion.
- Seize the US market
For a long time, Tether has been controversial due to its reserve transparency issues, operating in a gray area of regulation. However, with its main competitor Circle (the issuer of USDC) successfully going public and reaching a valuation of $30 billion, both regulatory pressure and opportunities are now presented to Tether. The recent passage of the GENIUS Act in the U.S. provides a clear regulatory framework for stablecoins, and Tether sees an opportunity to enter the world’s largest financial market.
This high-valuation financing resembles a meticulously planned “capital narrative.” By introducing well-known investors from Wall Street and having Cantor Fitzgerald, which has close ties to the U.S. political and business circles, serve as an advisor, Tether aims to label itself as “compliant” and “transparent,” thoroughly washing away its past negative image. In addition, Tether has launched a fully compliant stablecoin USAT designed specifically for the U.S. market and appointed Bo Hines, who has a background in the White House, as CEO, making its determination to enter the U.S. market abundantly clear.
- Expand diversified business
Tether's ambitions go far beyond stablecoins. CEO Paolo Ardoino stated that the funds raised will be used to scale the company's strategic initiatives in several new business lines, including stablecoins, artificial intelligence (AI), energy, communications, and commodity trading by several orders of magnitude. Tether has invested in over 120 companies, covering cutting-edge fields such as payment infrastructure, renewable energy, Bitcoin mining, agriculture, and even brain-machine interfaces.
Ardoino's philosophy is that Tether aims to provide four types of social stability: currency stability, communication stability, intellectual stability, and energy stability. This explains why they want to become the world's largest Bitcoin miner (to ensure network security), invest in AI infrastructure (to prevent centralization of intelligence), and build solar financial service kiosks in Africa (to provide energy and financial inclusion). This $500 billion valuation challenge is not only a pricing of its current profitability but also an expectation of its future technological empire.
The “loser's business” for latecomers?
Tether's success story is glamorous, but does this mean anyone can easily replicate it? Senior researcher Hasu poured a bucket of cold water, believing that “stablecoins are more profitable than the lending market, and are one of the biggest misconceptions in the DeFi space.”
For pioneers like Tether and Circle, they have established strong network effects and global acceptance, which is their deepest “moat”. For newcomers, issuing stablecoins is often a money-burning game. Taking GHO, the stablecoin launched by DeFi lending leader Aave, as an example, its issuance cost once reached as high as 8%, but the generated revenue was only 1-2%, which means that for every GHO issued, it incurs an annual “loss” of 6-7% in costs.
This reveals a harsh truth: while the profits in the stablecoin market are substantial, they are by no means easily attainable. New participants must pay a high price to gain market share, while also facing multiple challenges such as asset management, risk control, and regulatory compliance.
In addition, facing the situation where giants like Tether and Circle are pocketing the profits from stablecoin reserves, DeFi protocols have also begun to fight back. They are no longer satisfied with merely being application scenarios for stablecoins, but have launched a revolution called “vertical integration,” attempting to internalize the profits of the value chain.
The core of this revolution is: issuing your own native stablecoin.
Hyperliquid's native stablecoin USDH promises to return 100% of its treasury income to the ecosystem, with half used for token buybacks and half for ecosystem funding. Ethena's synthetic stablecoin USDe, through an innovative “cash and arbitrage” strategy, not only expands rapidly in scale but also provides substantial returns for stakers. Established protocols like Frax and MakerDAO have already begun to utilize the income from reserve assets for token buybacks or to offer savings rates to users.
These DeFi protocols are redistributing the “four cents” profits, originally belonging to stablecoin issuers, to token holders, users, and developers, attempting to establish a more self-sufficient and attractive ecosystem.
Capital, Narrative, and the Gamble of the Future
Returning to the original question: Is issuing stablecoins really that profitable? The answer is yes, but this huge profit belongs to the giants who have mastered network effects and the advantages of being first movers. Tether's leap in valuation from 12 billion to 500 billion dollars is a result of its strong profit capability, astute capital operations, and grand future narrative. This is not just a financing; it is a strategic positioning to declare its value to the mainstream financial world and compete for dominance in the future digital landscape of the dollar.
However, Tether's success is not unbreakable. On one hand, newcomers looking to get a piece of the pie need to find difficult-to-replicate differentiated offerings and be prepared to pay a hefty price for it. On the other hand, the wave of vertical integration from the DeFi world is attempting to fundamentally disrupt the existing profit distribution pattern.
As Tether's CEO stated, the success of USDT largely stems from the poor economic conditions in many countries, providing financial shelter for hundreds of millions. The war surrounding stablecoins has extended far beyond the crypto world; it concerns the flow of global capital, the transformation of financial infrastructure, and the possibility of a more open and equitable financial future. Tether's valuation of $500 billion is one of the most striking chips in this century's gamble.
#Tether
