Stablecoin giant Tether has reached a financial settlement with the bones of defunct crypto lender Celsius Network, and analysts say Circle (NASDAQ: CRCL) will not only survive but thrive following interest rate cuts.
On October 14, the Blockchain Recovery Investment Consortium (BRIC) announced that it had reached a $299.5 million settlement with Tether, issuer of the market-leading stablecoin USDT. The settlement brings to a close the lawsuit filed in August 2024 by the administrators of what’s left of Celsius, which filed for bankruptcy in 2022 after a massive fraud by its leadership.
BRIC is a group consisting of GXD Labs (a subsidiary of finance-focused investment group Atlas Grove Partners) and Wall Street investment managers VanEck that formed in 2023 to maximize recoveries in digital asset bankruptcy cases. GXD Labs managing partner David Proman expressed satisfaction regarding “the timeliness with which the settlement was achieved” but Celsius creditors may have other views.
The nearly $300 million settlement is a small fraction of the over $4 billion Celsius believed it was owed. The fight centered around the fact that Tether had liquidated ~40,000 BTC tokens that Celsius had put up for collateral to obtain USDT-based loans.
The liquidation occurred as Celsius’s financial house of cards was collapsing, and it found itself unable to produce additional collateral to meet Tether’s margin calls. The Celsius Debtors’ lawsuit claimed Tether liquidated the BTC collateral without granting Celsius the stipulated 10-hour waiting period that followed a margin call.
Celsius maintained that this accelerated liquidation hastened the company’s collapse. Tether attempted to have the suit dismissed but this bid was rejected in July by the U.S. Bankruptcy Court for the Southern District of New York.
Tether has become the largest lender in the digital asset space, a status that has caused concern regarding the soundness of the fiat reserves backing the now $181 billion in circulating USDT. For years, Tether has included billions of dollars’ worth of ‘secured loans’ among its reserves, an anomaly in a sector in which reserves consist primarily of U.S. Treasury bills and cash deposits.
Tether’s total secured loans grew to $10.1 billion in the Q2 ‘attestation’ of its reserves, despite the company having promised nearly three years ago that it would eliminate these loans from its balance sheet.
The usually chatty Tether CEO Paolo Ardoino tweeted a terse acknowledgment of the deal, saying only that the company is “pleased to have reached a settlement of all issues related to the Celsius bankruptcy.” Tether itself has yet to issue any corporate statement regarding the settlement.
Tether raise: why so serious?
Ardoino is a little more forthcoming regarding Tether’s recently revealed plans to raise up to $20 billion by selling up to 3% of the company via a new equity issue.
In a preview of an interview with podcaster Kevin Follonier set to be released Thursday (16), Ardoino says the 11-figure raise is “not about the money—it’s about sending a message.” Ardoino acknowledges lifting this line from Heath Ledger’s The Joker character in The Dark Knight film (and also acknowledges that this is “maybe not the right context” for this quote).
Ardoino attempted to address public skepticism as to why a firm that claims to have made nearly $14 billion last year—and claims to be on track to make the same amount this year—would need to raise extra cash. Ardoino said “the message that we want to send is that the mission of Tether is probably 100-fold from here.”
Ardoino called Tether a “once in a century company … I believe every company needs three things … the capital, the philosophy and the tech innovation to do whatever [it] wants … the message we’re giving is we have so much to demonstrate still. We want to grow so much … our vision is incredible. We want to have partners that are joining our company to help us build in that vision … and we don’t want to screw this up.”
Others not affiliated with the company have their own theories regarding the sudden need for $20 billion, and some of these theories are pretty wild. Others have reported that U.S. Commerce Secretary Howard Lutnick is personally soliciting investors regarding possible participation in Tether’s raise.
Cantor Fitzgerald (NASDAQ: ZCFITX), the Wall Street financial services firm that Lutnick founded, claims to have custody of Tether’s $100+ billion in T-bills and was reported as advising Tether on the fundraising effort.
But Cantor also holds “a convertible bond” with Tether, and while Lutnick turned over control of Cantor to his son Brandon (a former Tether intern) when he took the Commerce Secretary gig, this reported lobbying of investors on Tether’s (and Cantor’s) behalf is more than a little unusual for a public official.
Playing devil’s advocate for a moment, could this mean that the government might take some kind of stake in Tether? Just a few months ago, this would have sounded absurd. But the government has recently taken stakes in Intel Corporation (NASDAQ: INTC), rare earth producer MP Materials (NASDAQ: MP), Lithium Americas (NASDAQ: LAC), along with stakes in several other companies and a ‘golden share’ in U.S. Steel.
For what it’s worth, this isn’t the only Tether-led fundraising effort in motion. On October 3, Bloomberg reported that Tether and Antalpha Platform Holding—a financial services firm with ties to block reward mining hardware titans Bitmain—were looking to raise “at least $200 million” for a tokenized gold ‘treasury’ firm based on Tether’s XAUT gold-backed stablecoin.
XAUT currently boasts a market cap of around $1.5 billion, more than doubling its cap since the start of 2025. While much of this rise was driven by the price of physical gold reaching new all-time highs, the cap got a $437 million boost in August on a fresh XAUT mint by Tether. Tether also took an 8.1% stake in Antalpha earlier this year and the companies have sought to boost XAUT adoption beyond its current confines.
As usual, there’s no shortage of alternate theories as to what Tether’s trying to accomplish here. Watch this space.
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Stablecoin issuers seek national bank charters
This week has already seen two more stablecoin companies indicate their intentions to apply for a U.S. national bank charter while a third has received conditional approval of its application from the Treasury Department’s Office of the Comptroller of the Currency (OCC).
On October 15, the OCC announced that it had granted preliminary conditional approval of the de novo national bank charter application by Erebor Bank, the tech-friendly digital-only bank that aims to fill the gap left by the 2023 collapse of Silicon Valley Bank.
Backed by Peter Thiel’s Founders Fund, Joe Lonsdale and Palmer Luckey—the latter two the co-founders of military contractors Palantir and Anduril, respectively—and featuring a former Circle adviser as its co-CEO, Erebor’s stated mission is to become “the most regulated entity conducting and facilitating stablecoin transactions.”
Comptroller Jonathan Gould hailed the Ohio-based Erebor as “the first de novo bank to receive a preliminary conditional approval since I arrived at the OCC [in July]. I am committed to a dynamic and diverse federal banking system, and our decision today is a first but important step in living up to that commitment.”
Gould went on to say that the OCC will no longer “impose blanket barriers to banks that want to engage in digital asset activities. Permissible digital asset activities, like any other legally permissible banking activity, have a place in the federal banking system if conducted in a safe and sound manner.”
There are still procedural hurdles to be cleared, meaning it could be several months yet before Erebor is actually up and running. But given that Erebor’s application was only filed in June, it suggests the speed with which the OCC’s new regime plans to process applications of this type.
Lonsdale and Lucky were high-profile donors to President Trump’s 2024 election campaign but a person close to Erebor told the Financial Times that the company’s application received “no special treatment” from the White House. This same source claimed the quick approval was due to Erebor’s “extremely conservative business plan,” as it apparently has no desire to become a “wacky, techno crypto bank.”
Meanwhile, payment processor Stripe has applied for a national trust charter on behalf of its Bridge stablecoin-issuing platform. On October 14, Bridge co-founder Zack Abrams tweeted that the charter “would allow Bridge to operate under a unified federal framework consistent with the GENIUS Act.” (GENIUS is the stablecoin-focused legislation Trump signed into law this summer.)
Abrams added that a Bridge bank would provide “custody, stablecoin issuance, management of stablecoin reserves, and more. We’ve long believed stablecoins will be a core, regulated financial building block. This regulatory infrastructure will enable us to tokenize trillions of dollars and make this future possible.”
Also seeking OCC approval is Sony Bank, which on October 7 filed its application for a charter via a subsidiary called Connectia Trust. Among the goals of this new division—which is part of the Sony family but operates independently of the digital entertainment mothership—are “specified activities involving cryptocurrency,” including issuing “dollar-pegged stablecoins.”
Sony has been dabbling in the blockchain space for some time, including the launch this January of its Ethereum layer-2 network Soneium. That launch, overseen by the Singapore-based Sony Block Solutions Labs, is intended to realize a better digital environment for creators, rights holders, and fans.
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USDC: just getting started?
Other stablecoin issuers that are seeking charter applications include Circle, Ripple Labs (issuer of RLUSD) and Paxos (issuer of PYSUD, USDP, and part of the USDG consortium). Part of the appeal is the ability to custody one’s own reserve assets rather than hire an established bank to do so, thereby reducing a significant expense on the issuer’s balance sheet.
Circle’s reserves comprise fewer types of assets (primarily cash and T-bills) than Tether’s exotic mix of T-bills, BTC tokens, those ‘secured’ loans, bricks of gold, and undefined ‘other investments.’ This puts Circle in a more favorable regulatory position when it comes to complying with the strict reserve rules of the GENIUS Act, but it also means that it earns much smaller profits than Tether’s more freewheeling asset mix permits.
Nearly all of Circle’s revenue comes from interest earned on its T-bills, but with Trump pressuring the Federal Reserve to cut interest rates—and appointing a new (almost certainly more pliant) Fed chairman next year—Circle’s revenue could take a significant hit. Hence, the need to pare expenses.
But a recent note from Bernstein analysts chooses to view Circle’s glass as half-full. While acknowledging that every quarter-point cut in interest rates will shave 9% off Circle’s revenue and 11% off its earnings, Bernstein believes these cuts will be offset by USDC’s growing market share.
USDC currently holds a 29% share of the overall stablecoin market, but the analysts see this rising to 33% by 2027, while the overall market cap will more than double to $670 billion. Meanwhile, alternate revenue streams like payment network income and cross-chain transfer fees—which have risen to 4% of total revenue, up from 1% at the start of 2025—will help cushion the blow from interest rate declines.
Rather than adopt Circle’s more regulator-friendly stance, Tether has chosen to launch a brand new dollar-denominated stablecoin (USAT) that it claims will be GENIUS-compliant. Tether is betting on a strategy that prioritizes USDT’s use in emerging markets, leaving USAT to struggle to gain a toehold in America’s increasingly crowded regulated market.
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Paxos fat-fingers all the money in the world
We’ll close with a timely reminder that amid all the talk of stablecoins rewiring the rails (and rules) of finance, there are still occasional signs that it might not be time to take the training wheels off this bike just yet.
Paxos had a fat-fingered Wednesday for the record books after “mistakenly” minting $300 trillion worth of PYUSD, the stablecoin used by payments giant PayPal (NASDAQ: PYPL). For the record, the entire stablecoin market cap has only just exceeded $300 billion—and PYUSD’s share of that pie is only $2.65 billion—so this was a booboo for the ages.
While Paxos claimed it “immediately identified the error and burned the excess PYUSD,” others noted that it took 22 minutes for the unbacked tokens to get the axe. Regardless, the Aave decentralized finance (DeFi) platform opted to freeze the PYUSD reserve on a ‘precautionary’ basis “until we have total clarity of what exactly happened on the asset issuance stage.”
We half suspect Paxos got a message from Trump that he really was serious about paying off America’s national debt with a “$35 trillion crypto” piece of paper, and they just figured they’d add some cushion, just in case.
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Watch: Teranode is the digital backbone of Bitcoin
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Source: https://coingeek.com/tether-inks-300m-celsius-deal-paxos-mints-300t-pyusd/