Key Insights:
- Former Citi analyst disputes Arthur Hayes claims about Tether insolvency risk.
- Joseph states that disclosed reserves exclude a separate equity balance sheet with investments.
- Tether generates $10 billion annual profit from $120 billion treasury holdings.
Former Citigroup crypto research lead Joseph challenged Arthur Hayes’ analysis of Tether’s financial stability in a detailed X post.
Hayes suggested a 30% decline in gold and Bitcoin positions would eliminate equity, making USDT insolvent. Joseph spent hundreds of hours researching Tether for Citi and identified three major errors in Hayes’ assessment.
The analyst emphasized that Tether maintains a separate, undisclosed equity balance sheet beyond reported reserves. CEO Paolo Ardoino confirmed $30 billion in group equity backing $184.5 billion in stablecoin liabilities.
Expert Explains Tether Equity Balance Sheet Structure
Joseph’s first counterpoint addressed disclosed assets versus total corporate holdings. Tether reports reserves under the matching philosophy, showing how stablecoins are backed.
The company maintains a separate equity balance sheet not included in public disclosures. Generated profits flow to the equity side, including investments, mining operations, and corporate reserves.
The undisclosed balance sheet potentially holds additional Bitcoin beyond reported holdings. Remaining profits are distributed as dividends to shareholders.
Arthur Hayes’s analysis focused solely on disclosed reserve backing without considering the overall corporate structure.
The dual balance sheet approach of the USDT-issuer Tether separates operational reserves from corporate equity.
Joseph emphasized that understanding the distinction is important for assessing actual solvency risk.
Tether Profitability Supports $50-100 Billion Equity Valuation
Joseph stated Tether maintains approximately $120 billion in interest-yielding U.S. Treasury securities. The holdings generated a roughly 4% annual yield since 2023.
Treasury interest produces $10 billion in liquid profit annually with minimal operational costs.
The former Citi analyst estimated Tether equity value between $50 billion and $100 billion. Reports indicate the company explored raising $20 billion for a 3% equity stake.
The terms imply a $500 billion-plus valuation, though Joseph considers the figure overvalued and unlikely to materialize.
Tether’s profitability enables selling equity stakes to cover any balance sheet gaps. Arthur Hayes’s analysis ignored revenue generation and equity value, focusing solely on asset price volatility.
The $10 billion annual profit stream supports company operations and builds additional reserves. Joseph characterized Tether as a money printing machine given the treasury yield income.
Reserve Structure Comparison With Traditional Banking
Joseph’s third point compared the USDT-issuer’s reserves to traditional bank fractional reserve ratios. Banks maintain 5% to 15% of deposits in liquid assets.
The remaining 85% or more sits in illiquid holdings, including loans and securities. Tether holds substantially higher liquid reserve ratios than the banking sector.
The stablecoin issuer maintains a different structure but shares banking qualities. Key distinction involves the lender of last resort backing available to banks through central banks.
Tether lacks an equivalent emergency liquidity facility from monetary authorities. The company maintains better collateralization, offsetting the central bank backstop.
Arthur Hayes’s comparison implied that Tether operates with a similar risk profile to a leveraged financial institution. Joseph countered that the reserve composition and liquidity position exceed banking standards.
Tether’s model maintains a near-complete reserve backing in highly liquid government securities.
Joseph emphasized that structural differences make Hayes’ bank comparison misleading for solvency analysis.
Paolo Ardoino Details $30 Billion Group Equity Buffer
Tether CEO Paolo Ardoino responded directly to criticisms via an X post. The executive cited the Q3 2025 attestation showing a multi-billion dollar excess reserve buffer.
Total proprietary group equity approaches $30 billion, according to the official statement. The figure includes $7 billion excess equity beyond $184.5 billion stablecoin reserves.
An additional $23 billion sits in retained earnings as the Tether Group equity component. Total assets reach approximately $215 billion against $184.5 billion in stablecoin liabilities.
The CEO emphasized $500 million in monthly base profits generated from the U.S. Treasury yields alone. Annual treasury income reaches $6 billion at current rates, supporting ongoing operations.
Arthur Hayes’s scenario requiring a 30% asset decline ignores the $30 billion equity buffer. Price drops would need to exceed the equity cushion before threatening stablecoin backing.
Joseph and Ardoino both emphasized that the analysis of Arthur Hayes omitted critical financial components.