TEDA's excess reserves are halved, and Q2 losses approach US$4 billion

Tether's excess reserves halved, Q2 lost nearly US$4 billion

Tether's excess reserves fell from US$8.23 billion to US$4.11 billion in one quarter. The company reported net income of $1.5 billion for the second quarter of 2026. Its comprehensive results for the first half of the year were close to negative US$3.17 billion. Tether has not explained what led to the halving of reserves.

Tether's latest reserve certificate, compiled by BDO and released on July 31, provides readers with two contradictory data. The company achieved net income of approximately US$1.5 billion in the second quarter of 2026, its brightest performance in months. However, in the same quarter, its excess reserves exceeding USDT holders 'debt fell to $4.11 billion on June 30 from $8.23 billion at the end of March. This means that the issuer's accumulated reserves over the years are close to halving, and Tether did not provide any detailed accounts to explain the whereabouts of the funds.

Half of the reserves accumulated over the years disappeared in 90 days.

Almost all of the profits come from Tether's holdings of U.S. Treasury bonds and repurchase agreements. No matter how volatile the price of cryptocurrency fluctuates, these assets can bring stable returns. At the end of the quarter, total assets were US$187.75 billion and liabilities were US$183.64 billion. After subtracting the two, we obtained a buffer of $4.11 billion, a significant decrease from $8.23 billion three months ago.

All this has not affected the support of the USDT itself. The USDT has remained fully mortgaged, and its circulating supply has actually increased by approximately US$446 million to US$184.6 billion, giving Tether's share of the global stablecoin market more than 60%, while the overall market is shrinking. What has changed is the buffer space above full collateral, a figure used by the market to gauge how much pressure issuers can withstand before the collateral approaches face value. Profits of $1.5 billion also fell significantly from the same period last year, when Tether reported net income of approximately $4.9 billion for the second quarter of 2025. This gap is largely due to the label change, as the 2025 data includes gains from gold and Bitcoin, while this year's operating profit does not include them.

Net operating profit *

First quarter: approximately US$1.04 billion → Second quarter: US$1.5 billion (+44%)

Excess reserves

First quarter: US$8.23 billion → Second quarter: US$4.11 billion (-50%)

Total assets

First quarter: Approximately US$191.8 billion → Second quarter: US$187.75 billion (-2%)

Total liabilities

First quarter: approximately US$183.55 billion → Second quarter: US$183.64 billion (flat)

Comprehensive results (including unrealized gains and losses)**

First quarter: approximately + US$1.04 billion → Second quarter: Approximately-US$4.21 billion (turned into loss)

* This item was called "net profit" in the first quarter; it was re-labeled as "net operating profit" in the second quarter to exclude unrealized fluctuations in gold and Bitcoin. ** The second quarter consolidated results are extrapolated: the first half consolidated results were approximately-US$3.17 billion minus approximately + US$1.04 billion for the first quarter.

Gold and Bitcoin are the culprits

Tether never detailed the reasons for the decline in reserves, but its reserve portfolio points directly to the problem. The company added 14 tons of gold in the second quarter, bringing its gold holdings to approximately 146.2 tons, while holding more than 98,932 bitcoins, valued at approximately US$5.8 billion as of June 30. Both asset classes performed poorly in the second quarter. As of the end of June, bitcoin prices were close to $58,600, well below levels at the beginning of the year, while gold fell from spring highs to about $4000 an ounce. Regardless of whether actual transactions occur, losses on such positions will be reflected in the consolidated results as long as prices fall.

U.S. Treasury bonds (direct and indirect, short-term): approximately US$115 billion

Gold: 146.2 tons, approximately US$18.83 billion

Bitcoin: 98,932, approximately US$5.8 billion

First-half data confirms this. Tether's consolidated financial results for the first half of 2026 were close to negative US$3.17 billion. Compared with its net income of approximately $1.04 billion in the first quarter, the second quarter itself suggests that losses could exceed $4 billion once unrealized fluctuations are accounted for. Tether has not disclosed specific factors that contributed to the decline in performance, leaving the reconciliation between its apparent profits and shrinking reserves to speculation.

Tether refuted this. CEO Paolo Ardoino said the second quarter "demonstrated the strength of the Tether reserve strategy under real market pressure," noting that USDT remains fully collateralized despite fluctuations, and that the paper losses generated by long-term holdings of gold and Bitcoin are of little significance to companies that serve hundreds of millions of users in emerging markets. His view is that changes in operating profits, rather than mark-to-market, reflect the actual return on reserves.

Quietly renamed the profit indicator

The first quarter referred to net profit as "net profit" and the second quarter as "net operating profit." This change is not superficial. Net operating income only reflects recurring gains from U.S. Treasurys and repo agreements, excluding mark-to-market movements in gold and Bitcoin, so putting this indicator first, highlighting the predictable parts of the business, while hiding the more volatile parts in the consolidated results further below the report. This accounting treatment is legal, but it also removes the worst numbers in the quarter from the title, and readers need to find for themselves.

KPMG audit still not completed

Tether said in March that it had hired KPMG to conduct its first comprehensive financial audit, a request for years by critics who refused to treat quarterly certificates from small accounting firms as equally valid. Five months have passed and the audit has not yet been completed.

Second-quarter data again comes from BDO certification. The announcement only mentioned that the audit process of the Big Four accounting firms is still continuing, with no completion date, no interim results, and no timetable. Certification only confirms the accuracy of numbers at specific points in time; audits examine the financial statements and the controls behind them. In a quarter when reserves are halved and explanations are delayed, the gap between the two jobs is more important than ever.

The reserve portfolio that the United States hopes to remove

Gold and bitcoin, which add to Tether's returns in good quarters, are exactly the assets that U.S. law is currently trying to remove. The GENIUS Act, signed in July 2025, requires stablecoin issuers to support their tokens with the most liquid assets, namely cash and short-term U.S. Treasury bonds, and gives foreign issuers a transition period until July 2028. Currently, about a quarter of USDT's collateral is in categories prohibited by law:

Precious metals, including 146.2 tons of gold on paper; Bitcoin holdings, valued at approximately $5.8 billion at the end of the quarter; and secured loans, Tether fell approximately $2.38 billion in the second quarter.

Europe has taken action. As of July 1, 2026, as Tether chose not to seek e-currency token authorization to comply with EU reserve and deposit rules, no MiCA-licensed exchange in the EEA region offers USDT trading pairs. Circle's USDC is designed to meet the requirements of both regulatory systems, absorbing European balances on regulated platforms as traders move funds away from the USDT.

Thinner buffer touches treasury bond market

The smaller buffer does not mean that the USDT lacks collateral, and there is nothing in the certificate to indicate that the holder cannot redeem it. But this does reduce Tether's room to absorb shocks if gold or cryptocurrencies fall further, and if this trend continues, traders may start pricing risk and shift collateral-sensitive positions to options that are fully transparent and comply with U.S. compliance requirements.

Its impact goes beyond the cryptocurrency realm. Tether holds nearly $115 billion in U.S. Treasurys, making it one of the largest private holders of U.S. Treasurys, so any mandatory changes to the way it is managed, whether due to redemptions or the looming 2028 deadline, will resonate in short-term financing markets far from the stablecoin world. The next certification, and the timing of the final completion of the KPMG audit, will reveal whether the second quarter was a one-time shock of the gold and Bitcoin downturn, or whether the narrowing of profit margins became the norm.