The behavior of the central bank
In practice, Tether does a number of things that are closer to the way central banks work than the classic stablecoin that most people imagine.
First, Tether directly controls the amount of money in circulation. New USDT is created when verified clients deposit fiat money, and it is withdrawn from circulation when USDT is returned back in exchange for dollars. This constantly adjusts the supply to demand. Trading on exchanges occurs separately, but the real changes in the balance sheet occur precisely in this process of issuing and withdrawing tokens.
Secondly, Tether is actively managing its reserves. Most of the funds are held in short-term U.S. Treasury bonds and repo agreements, with a smaller share of gold and Bitcoin. Such an approach allows for high liquidity and relative security. Due to the size of the portfolio, Tether is one of the larger buyers of short-term US debt today and has a real impact on this market.
Third, Tether generates income in a way that resembles the classic income of central banks. Users hold USDT, which yields no interest, while Tether earns interest on the assets that these tokens are backed by. In a period of high interest rates, this model is extremely profitable. By the third quarter of 2025, Tether had made more than $10 billion in profits and accumulated about $6.8 billion in excess reserves. That is why the comparison with a private central bank is not an exaggeration.
Fourth, Tether has technical and operational tools that resemble monetary control. It can freeze certain addresses at the request of regulatory or police authorities. It also decides which blockchain networks USDT will exist on. In the past, it has discontinued support for multiple networks to reduce technical and operational risk.
Although Tether does not conduct the official monetary policy of the state, it actively manages the digital dollar, which is used daily by a huge number of people and companies around the world.
Fun fact: Tether was launched in 2014 under the name Realcoin, and in the same year it was renamed Tether. Despite its many controversies, it is still one of the oldest and most widely used stablecoins in the crypto industry.
Source: cointelegraph
How Tether actively manages the USDT ecosystem
Today, Tether actively intervenes within its own dollar system using mechanisms reminiscent of monetary control tools.
On the regulatory side, it can freeze addresses related to sanctions or police investigations. He formally introduced such a practice at the end of 2023 and has since been applied in specific cases, including wallets linked to the sanctioned Russian exchange Garantex. It is a direct decision of the issuer that immediately affects who can and cannot use dollar liquidity on the blockchain.
On the operational side, Tether manages reserves as a portfolio of short-term financial instruments. The emphasis is on US Treasury bonds and repo agreements, which allows the issuance and withdrawal of USDT to be linked to highly liquid assets that also generate interest income. This maintains flexibility without compromising system stability.
According to the latest reserve report, such a structure generated multibillion-dollar profits and created a significant reserve surplus. This way of managing is reminiscent of the market operations carried out by central banks, although Tether is still a private company.
In addition, Tether itself determines where its system exists operationally. Over the years, it has added and removed blockchain networks, focusing on those with the most use and the most stable infrastructure. Support for legacy networks like Omni, BCH SLP, Kusama, EOS, and Algorand has been phased out, with token redemptions continuing during the transition period.
Lastly, Tether uses a portion of the operating profits generated to diversify reserves. From 2023, it directs up to 15 percent of realized profits to Bitcoin, which is another decision of the issuer with consequences for the entire USDT ecosystem.
Source: cointelegraph
How Tether Expands Beyond USDT
Over the past year and a half, Tether has gradually changed from a single-token-focused company to a broader financial infrastructure system.
In April 2024, it reorganized into four business units: Tether Finance, Tether Data, Tether Power, and Tether Edu. These units cover digital asset management, data and artificial intelligence projects, energy initiatives and educational programmes. This formalized a strategy that clearly shows that Tether’s business is no longer limited to just issuing USDT.
In the energy segment, Tether has invested capital and operational know-how in the Volcano Energy project in El Salvador. It is a 241 megawatt large wind and solar energy system, intended to power one of the largest Bitcoin mining operations in the world. Such investments directly support the stability of the infrastructure required for payments and settlements within the crypto system. In parallel, Tether has shut down support for multiple legacy blockchain networks to concentrate liquidity where tools and actual demand are strongest, a decision with an impact on the entire ecosystem.
To directly access the US market, Tether announced USAT, a regulated dollar token aimed at the US. The token would be issued by Anchorage Digital Bank, in accordance with domestic rules, while the existing USDT would remain focused on global markets. If the project goes ahead as announced, Tether would get a regulated platform within the US, while retaining its existing offshore structure.
Source: cointelegraph
Why isn't it a central bank?
Despite its many similarities, Tether is still not a sovereign monetary institution.
It does not set interest rates, does not act as a lender of last resort, and does not have a public mandate. Its transparency remains based on quarterly reserve reports rather than a full financial audit. Although the company claims to be in negotiations with one of the major audit firms, the difference between the status report and the actual audit remains one of the main reasons why many reject the comparison with the central bank.
There are also issues related to the structure of the balance sheet. Tether has repeatedly maintained its portfolio of secured loans, although it had previously announced a reduction in such exposure. This category of assets regularly attracts attention because the terms of the loans and the parties to whom they are granted are not always known in detail. More broadly, Tether depends on private banks, asset custodians, and repo partners rather than government support, which means that market confidence and infrastructure stability are not entirely under its control.
Finally, some of the moves that are most reminiscent of monetary policy are actually regulatory compliance measures. The freezing of addresses is most often carried out on the basis of requests from sanctioning and police authorities, and not as an independent decision on the management of the system.
Interesting fact. In December 2023. Tether said it had assisted more than 140 police and regulatory bodies in 45 jurisdictions in freezing about $835 million related to fraud and illegal activities.
Source: cointelegraph
Where Tether fits into the bigger picture
Ultimately, Tether today looks less like a classic stablecoin issuer and more like a private, dollar-pegged system that serves the crypto market. It actively increases and decreases the amount of USDT through large issuances and redemptions, holds reserves in short-term U.S. Treasury debt and repurchase agreements, generates multibillion-dollar interest income, and implements regulatory compliance measures as needed.
But this comparison has clear limits. Tether does not have a public mandate or state protection. Transparency continues to rely on reserve reports rather than a full audit. His monetary policy-like moves are mostly related to regulatory requirements rather than broader management of the economy or market cycles.
If you want to keep track of where this story is going, it’s worth paying attention to the reserve structure, profit level, pace of USDT redemption, progress towards full revision, and the development of the USAT project in the US and cooperation with Anchorage. It is at these points that it will be seen whether Tether will behave more and more like a central bank or will clearly move in the other direction.
