Author: Ivan Wu on Blockchain

In recent years, stablecoins have become core infrastructure for the global crypto-financial system. Tether, its largest issuer, has sparked widespread discussion due to rumors that it is seeking a funding valuation of approximately $500 billion, surpassing OpenAI and ByteDance and becoming one of the world's most valuable private companies. This valuation has sparked controversy within the capital markets and the crypto industry: Tether has indeed demonstrated impressive profitability thanks to the excess profits generated by high-yield assets, but its business model is highly dependent on the macro interest rate environment, regulatory landscape, asset transparency, and market structure. This article will analyze the practical support and potential concerns of this valuation from five perspectives: revenue, asset structure, market share, regulatory risks, and horizontal valuation.

Revenue and profit

Tether, the issuer of the USDT stablecoin, has achieved astonishing profits in recent years from interest income. As global interest rates rise, Tether has invested a large portion of its user-exchanged USD reserves in low-risk assets like U.S. Treasuries, generating high interest income. Tether reportedly achieved approximately $13.4 billion in profits in 2024, primarily driven by interest income from its substantial holdings of U.S. Treasuries. This profit scale not only far exceeds that of most crypto companies but also ranks among the highest among internet technology companies.

In comparison, while OpenAI's valuation is projected to soar to $80-90 billion by 2023-2024, its revenue remains small, relying primarily on licensing and subscriptions for its AI models. It's still in its investment phase, with limited profitability. (The fact that its valuation has now risen to $300 billion, or even $500 billion, reflects a bet on future growth.) ByteDance's valuation is in the $250-300 billion range, with profits estimated at approximately $40 billion in 2023. Its businesses span short videos, advertising, e-commerce, and other sectors, supporting a valuation of hundreds of billions of dollars with substantial revenue and profits. Circle, the issuer of the USDC stablecoin, plans to be valued at only $9-10 billion at its 2024 IPO. Its 2024 revenue was approximately $1.68 billion, with a net profit of just $156 million, placing it in a far larger league than Tether.

From a profitability perspective, Tether's current profits far exceed those of OpenAI and Circle, approaching or even exceeding those of some traditional tech giants. However, its business model is also highly dependent on external factors: interest rates and stablecoin demand. Tether does not pay interest to users and has few other major revenue sources, meaning its current substantial interest income is cyclical. Once global interest rates fall back to low levels, Tether's interest income will shrink significantly, and profitability may decline. Furthermore, the growth potential and trading volume of the stablecoin market will also impact Tether's revenue. In contrast, the valuations of OpenAI and ByteDance are more based on long-term growth expectations driven by technological innovation or user scale, while Tether's high valuation requires investors to believe that its current profit levels are sustainable or even growing. Therefore, based solely on revenue and profit, assigning Tether a $500 billion valuation is somewhat aggressive and requires consideration of profit sustainability.

Asset structure

To assess whether Tether's valuation is reasonable, one must examine its asset-liability structure and risk profile. According to Tether's regularly disclosed reserve reports, its reserve assets are primarily composed of highly liquid, low-risk assets. As of the end of 2023, Tether claims that nearly 90% of its reserves consisted of cash and cash equivalents, including short-term U.S. Treasury bills, overnight and term repurchase agreements, and money market funds. Tether has long since eliminated risky assets such as commercial paper, instead holding a large amount of highly rated securities. Specifically, some analysts indicate that Tether holds over $100 billion in U.S. Treasury bills, approximately 82,000 bitcoins (valued at approximately $5.5 billion), and 48 tons of gold reserves to enhance asset diversification. Tether has also engaged in some external lending and other investments, but as of the end of 2023, its excess reserves of approximately $5.4 billion were sufficient to cover all of these lending exposures. In other words, even after deducting these risky assets, Tether's assets fully cover its liabilities, with a substantial margin as a buffer.

High reserve transparency has also bolstered market confidence. Tether currently publishes its asset composition and reserve balances quarterly through audit-grade attestation reports from independent accountants such as BDO. This transparency was lacking in the past—Tether faced scrutiny for historically insufficient disclosures and was fined by regulators in 2021 for misleading statements. However, recent reports indicate a significant improvement in the quality of Tether's reserves, which has been proven to withstand real-world demand. Under normal circumstances, Tether is capable of meeting large-scale user redemptions, and its substantial holdings of U.S. Treasury bonds and repurchase agreements can be quickly liquidated. According to statistics, Tether successfully handled redemptions of up to $21 billion during the 2022 crypto market downturn and maintained repayments.

Of course, Tether is not completely free of risks in its asset structure. First, while Tether's holdings of Bitcoin and gold have generated some returns for the company (the price increases of these assets have contributed significant unrealized profits to Tether), they are risky assets, and in extreme circumstances, fluctuations in their value could impact Tether's net asset value. Second, while Tether's transparency has improved, it has not yet undergone a comprehensive public audit. External trust in its reserves is primarily based on attestation reports and the company's reputation, which differs from the rigorous regulatory audits that publicly listed companies undergo. Third, Tether's assets are heavily concentrated in U.S. Treasuries. This benefits from the U.S. government's credit backing while also being tied to trends in traditional financial markets and the U.S. debt situation. If the U.S. Treasury market experiences significant volatility or liquidity tightens, Tether's assets would also come under pressure. Notably, U.S. Treasury officials recently stated that large stablecoin issuers have become important buyers of U.S. Treasuries due to the government's need to issue large amounts of bonds to raise funds. In a sense, Tether has been integrated into the traditional financial system, a reflection of its strength but also a sign that its fate is partially tied to it.

Overall, TEDA's balance sheet is currently relatively sound, with ample safety cushions. This provides some basis for its high valuation—after all, a massive market capitalization must be backed by real money. However, we must also recognize that its asset allocation strategy and transparency need to be maintained or even improved to sustain long-term market confidence in its high valuation.

Competitive position and market share

Tether's leading position in the stablecoin market is undisputed. USDT currently holds the largest market share. As of the third quarter of 2025, USDT's market capitalization will account for approximately 59% of all US dollar-denominated stablecoins, maintaining its position as the top stablecoin. According to the latest data, USDT's circulation has reached approximately $172 billion, while the second-ranked USDC (issued by Circle) has a market capitalization of approximately $74 billion, less than half of USDT's. USDT has a massive user base, reportedly close to 500 million users worldwide. In areas such as crypto exchanges, cross-border remittances, and over-the-counter trading, USDT has long served as the "digital dollar," forming the foundation of crypto market liquidity.

However, Tether's leading position is being challenged and eroded by competitors. USDC, its primary competitor, has consistently touted its compliance and transparency advantages. Following the banking crisis in 2023 (the partial reserve bank deposit impairment incident), USDC's market capitalization declined, but recovered somewhat in 2024–2025. According to Circle, since US legislation clarified the regulatory framework for stablecoins (e.g., the "Genius Act"), institutional demand for USDC has increased significantly. USDC circulation increased by 90% year-over-year in the second quarter of 2025, and over $12.3 billion in new funds flowed into USDC in the third quarter, bringing its market share back to approximately 25%. This demonstrates the latecomer advantage of compliant stablecoins amidst a clearer regulatory environment and increased participation in traditional finance.

Furthermore, a growing number of emerging stablecoin projects are further carving up market share. FDUSD (First Digital USD), a Hong Kong-based stablecoin, emphasizes regulatory compliance and transparency, and has gained popularity in Asian markets, particularly due to Hong Kong's favorable policies. USDe, a synthetic USD stablecoin launched by Ethena Labs, is an intriguing new entrant. It isn't directly backed by fiat deposits, but instead maintains a 1:1 peg through crypto assets and derivatives hedging. Remarkably, USDe has surged in size in a short period of time: in the third quarter alone, it added approximately $9 billion in net market capitalization, becoming the third-largest stablecoin in the stablecoin market, with approximately 5% market share. Furthermore, between 2023 and 2025, a number of special-purpose or institutionally issued stablecoins will emerge, such as PayPal's PYUSD (a payment giant's entry into the market, aiming to connect crypto payments) and MakerDAO's new stablecoin (possibly an upgraded version of the decentralized stablecoin DAI). Both have reportedly amassed over $1 billion in circulation within a short period of time.

The changing market landscape means that despite its size, Tether is not completely secure. USDT faces several concerns in its stablecoin competition:

In terms of product substitution and innovation, if a stablecoin can clearly surpass USDT in terms of trust and convenience (e.g., by being fully compliant and globally accepted, or by being more decentralized and censorship-resistant), USDT's leading position could be shaken. The strong comeback of USDC and the sudden rise of USDe both indicate a market gap that could be filled.

Regarding policy impacts, if major countries/regions favor the use of domestically regulated stablecoins (e.g., the US may push institutions to use regulated USDC or bank-issued stablecoins), Tether's market share in regulated markets will be squeezed. For example, BUSD (Binance Dollar), once the third-largest stablecoin by market capitalization, rapidly withdrew and was delisted in 2023 after its issuer, Paxos, was halted by New York regulators. This is a prime example of how policy risk can impact market dynamics.

Furthermore, USDT faces competition from diverse scenarios within the same space. Stablecoins are not only circulated on exchanges, but different stablecoins may have their own advantages in areas such as cross-border trade and DeFi lending. If Tether fails to expand into new scenarios in a timely manner, other stablecoin projects with a better understanding of local needs or stronger technology will take market share.

Despite this, Tether has its competitive advantages. First, USDT boasts the strongest network effects, the widest range of trading pairs, and the best liquidity, making it difficult for new currencies to completely replace it. Second, Tether's long-established brand recognition and user experience globally (particularly in emerging markets in Asia Pacific and within the crypto trading sector) will not fade easily. Furthermore, Tether is actively developing strategies, such as promoting multi-chain issuance and integrating with payment channels in various countries, to consolidate its market position. Overall, from a competitive perspective, Tether's $500 billion valuation implies the market's belief that it can continue to dominate the stablecoin ecosystem and withstand competition. This valuation rationale would be shaken if its market share were to be significantly diluted or its growth stagnated in the future.

Regulatory and compliance risks

A key factor influencing Ted's valuation is the regulatory environment. Ted has faced numerous challenges and penalties for transparency and compliance issues. In 2021, Ted reached settlements with the New York Attorney General's Office and the Commodity Futures Trading Commission (CFTC), respectively, for misleading statements about the composition of its reserve assets, resulting in fines exceeding tens of millions of dollars. Regulatory investigations revealed that Ted's reserves sometimes fell short of 100% coverage in its early years, raising market concerns about its solvency. While Ted has since improved its disclosures, it has yet to fully address these concerns. Some critics argue that only a comprehensive audit can verify the authenticity of Ted's reserves, but Ted has yet to conduct a thorough audit, citing its complex corporate structure and inability to disclose sensitive information.

As a global financial center, the US's regulatory direction regarding stablecoins will directly impact Tether's operational prospects. In the past few years, US regulators have adopted indirect tactics against Tether, such as cutting off its banking channels and investigating its partners, because Tether's principal entity is not located in the US. However, as stablecoin usage expands, the US is exploring direct legislation to regulate stablecoin issuance. Between 2023 and 2024, Congress debated the Stablecoin Regulation Act, which would require any institution issuing a payment stablecoin for US users to obtain a registration or banking license. In mid-2025, the US passed the Genius Act, clarifying the legal status and regulatory requirements for stablecoins as payment instruments. This positive development has garnered increased institutional investment in compliant stablecoin companies, including Circle. For Tether, this presents both an opportunity and a challenge: the opportunity lies in clarifying regulations, allowing it to conduct business more openly if it becomes a compliant operator; the challenge lies in complying with the new regulations before participating in the US market. Tether is not sitting idly by. In September 2025, Tether announced plans to issue a new US-regulated dollar stablecoin, "USA₮," and hired the former White House cryptocurrency director to head its subsidiary. This suggests Tether intends to spin off a US-compliant entity to meet regulatory requirements. If this plan goes smoothly, Tether may be able to meet the compliance requirements of the US market without abandoning its core business. However, Tether's past compliance record and overseas background may still raise concerns in the eyes of regulators. Even with the new license, it remains to be seen whether it can gain the full trust of US authorities and mainstream financial institutions.

In addition to the US, the EU has adopted the MiCA regulation (a framework for regulating markets in crypto-assets), which also imposes capital, liquidity, and reporting requirements on stablecoin issuance. MiCA will gradually take effect between 2024 and 2025, at which point unregistered stablecoins will no longer be legally circulated in the EU. If Tether wishes to remain unaffected in the European market, it may need to establish a subsidiary in the EU and subject itself to regulation, which would increase compliance costs and transparency requirements. In Asia, Hong Kong, Singapore, and other regions are also developing their own regulatory guidelines for stablecoins. For example, the Hong Kong Monetary Authority plans to require stablecoin issuers to be licensed and meet reserve management standards in Hong Kong. Some countries and regions, including mainland China, strictly restrict domestic residents from using foreign stablecoins, limiting Tether's growth potential in certain markets.

Due to Tether's widespread global use, it has drawn increased scrutiny from law enforcement agencies worldwide. For example, the US Department of Justice is rumored to be investigating Tether for possible involvement in bank fraud and money laundering. Any future major legal accusations or lawsuits would directly undermine market confidence in USDT. Furthermore, stablecoins have become entangled in geopolitical dynamics: To maintain the effectiveness of financial sanctions, the US may target stablecoin issuers that fail to cooperate with efforts to freeze illicit funds. In contrast, Circle and other exchanges cooperate with the freezing of assets held by sanctioned addresses, while Tether has historically been more restrained in this regard (although it has frozen specific illicit addresses). This divergence could lead to policy preferences: regulators favor controllable stablecoins and remain wary of offshore entities like Tether.

Stablecoins have become a critical systemic node in the crypto market. Problems with leading companies could trigger chain reactions throughout the entire market. Consequently, regulators are paying particular attention to whether Tether poses systemic risks. Many financial officials have repeatedly stressed the need for strict regulation of stablecoins to prevent runs and shocks. In this climate, if Tether hopes to achieve a valuation of $500 billion, it must convince investors that it will not easily collapse due to regulatory crackdowns or a credit crisis. On the one hand, Tether has proactively improved its compliance image in recent years, such as cooperating with judicial authorities to freeze USDT funds implicated in crimes and collaborating with law enforcement agencies in various countries. However, its parent company, iFinex, is frequently cited for its involvement in the Bitfinex exchange theft and its history with the banking system. These factors may be discounted in valuation discussions.

Overall, regulatory and compliance risks are the biggest uncertainties hanging over Tether. Compared to other highly valued companies, Tether operates in an industry with even greater regulatory uncertainty: OpenAI faces primarily competitive and ethical risks, ByteDance faces geopolitical scrutiny, and Tether faces the possibility that financial regulation will directly impact its survival. When assessing a $500 billion valuation, this factor must be appropriately discounted. Otherwise, simply valuing the company based on current profit multiples while ignoring the potential for regulatory black swan events is a blatant disregard for risk.

Horizontal valuation comparison

Comparing TEDA's potential valuation with several benchmark companies helps analyze whether the $500 billion is reasonable:

OpenAI, a unicorn in the field of artificial intelligence, completed a funding round in March 2025, led by SoftBank and others, valuing the company at $300 billion. Subsequently, Reuters and other media outlets reported that the company was in talks to sell secondary equity to employees, a transaction that could push its valuation to approximately $500 billion. OpenAI's valuation is based on expectations for its future disruptive technology. Although its revenue is projected to be only a few billion dollars in 2024, the capital market has assigned it an extremely high multiple, valuing its leading position in general artificial intelligence and its potential network effects. In contrast, Tether has limited technological barriers and room for innovation, and its primary business model is relatively traditional (earning profit margins). Judging solely by revenue/profit multiples, OpenAI's current valuation is significantly higher than Tether's (OpenAI's valuation is in the tens of billions despite near-zero profits), but this is a bet on future growth. Tether's $500 billion valuation, on the other hand, suggests the market believes its existing business is highly mature and stable, an expectation that differs from OpenAI's high-growth rationale.

ByteDance is one of the world's largest unicorn companies by revenue, with a 2023-2024 valuation range of approximately $250 billion to $300 billion (the latest internal employee trading valuation is approximately $330 billion). This valuation is supported by its vast user ecosystem (such as TikTok and Douyin) and substantial profitability. Its net profit in 2023 is reportedly approximately $40 billion, and its revenue in 2024 is expected to exceed $150 billion. Even so, due to political risks such as the US ban, ByteDance's valuation multiple is not high. $330 billion is only about 8 times its annual profit and less than one-fifth the market capitalization of similarly listed companies. By comparison, if TEDA is valued at $500 billion, based on its 2024 profit of approximately $1.3 billion, its price-to-earnings ratio would be over 37 times—a multiple that approaches or exceeds that of many fast-growing technology companies. Considering that Tether's business growth rate is slower than that of internet companies (the annual growth rate of stablecoin demand is far lower than the growth of social media users), such a high multiple seems unjustified by conventional standards. More importantly, the ByteDance case demonstrates that even with strong performance, regulatory and political risks can still lead investors to assign a low risk premium. Similarly, regulatory uncertainty surrounding Tether should lower its valuation expectations, rather than reflecting a "zero risk" or even "policy-friendly" status as some optimistic forecasts suggest.

Circle (USDC), Tether's most direct comparable company, is seeking a public listing in 2024, with a market valuation of approximately $9-10 billion, significantly lower than Tether. This is due to Circle's significantly smaller business scale: its total revenue in 2024 will be only $1.68 billion, with net profit in the tens of millions. USDC's market capitalization is less than half that of USDT. Of course, Circle's highly compliant development model differs from Tether's in terms of long-term growth potential and profit model. For example, in addition to interest income, Circle also generates service revenue from blockchain payment services and cross-border settlement. Currently, the market favors Tether's ability to profit from interest rate differentials, while somewhat overlooking the costs Circle incurs for compliance (such as sharing interest with banking partners and reserve custody fees). However, if compliance becomes a defining factor in the stablecoin industry in the future, Circle's potential for valuation growth may actually be even higher, as it faces virtually no regulatory hurdles. Conversely, if Tether fails to overcome its compliance challenges, even its current high valuation could decline with policy changes.

If Tether is placed within the broader context of corporate valuations, $500 billion is comparable to some of the world's largest private companies. For example, Elon Musk's SpaceX is expected to be valued at approximately $400 billion by mid-2025. It's even approaching the market capitalizations of publicly listed tech giants like Alibaba and Tencent. This means that if the market were to value Tether at this level, it would be assuming that its global standing would rival that of these companies, which possess cutting-edge technology or vast user platforms. Many analysts are skeptical of this view. After all, stablecoin issuance is essentially more of a financial service or banking-like business than an internet/AI business with high technological barriers and explosive expansion potential. Even the largest traditional financial institutions rarely reach $500 billion in market capitalization. Therefore, from a financial industry perspective, Tether's valuation already exceeds that of most banks and financial services companies.

Based on the above horizontal comparison, we can ask the following question: Why is Tether considered to be on par with OpenAI and surpassing ByteDance?

As mentioned above, Tether is currently highly profitable. If the market believes that these profits are not only sustainable but can even increase further with the growth of stablecoin usage, then a valuation multiple comparable to that of a tech giant might be justified. Based on $13.4 billion in annual profits, a valuation of $500 billion would yield a price-to-earnings ratio of approximately 37. While this is higher than that of traditional banks, it is not uncommon for some growth-oriented tech companies. If Tether can steadily expand its USDT issuance annually and enter more sectors (such as payment settlement and securities tokenization), its profits may have room for significant growth, thus justifying its high valuation.

Stablecoins have long been essential infrastructure for the crypto market and certain cross-border transactions, and Tether holds a dominant position within this sector. In a sense, USDT is the "reserve currency" of the digital asset world. This status inherently holds immense strategic value, similar to Visa's position in traditional payments. If investors view USDT as a core pillar of the future digital financial system, their willingness to assign it a high valuation is understandable. Furthermore, Tether executives hinted that this round of financing will be used to expand into new business lines such as artificial intelligence, commodity trading, energy, communications, and media. If Tether successfully leverages its capital and influence in the crypto space for cross-border development, its potential is indeed far greater than simply issuing a stablecoin.

It's important to note that the strongest criticism of the $500 billion valuation lies in its disregard for risk factors. Optimistic valuations often assume everything goes smoothly, but the reality is that TEDA's potential risks are much higher than those of typical tech companies. As mentioned earlier, any of these factors—regulatory crackdowns, interest rate shifts, competitive encroachment, and credit events—could significantly impact TEDA. ByteDance's valuation discount clearly demonstrates that the market considers risk and reduces valuations accordingly. Therefore, a more prudent valuation approach would be to discount TEDA's fundamental earnings to cover potential losses. If TEDA were valued at a more conservative multiple, such as a 15-20x P/E ratio, the corresponding market capitalization would be around $200-270 billion. This is perhaps closer to its "reasonable valuation range."

in conclusion

Considering factors such as revenue, assets, competition, and regulation, Tether's pursuit of a $500 billion valuation is both highly anticipated and controversial. While this valuation certainly reflects the market's recognition of Tether as a leading stablecoin and its recent impressive profits, we must remain cautious regarding its rationality.

On the one hand, Tether's current financial performance is excellent, with profits surpassing many global companies. Its stablecoin plays a fundamental role in the cryptoeconomy, enjoying a certain degree of monopoly. These factors provide the basis for its high valuation. Looking ahead to the next few years, if the crypto market continues to expand and stablecoins become more widely adopted, Tether's business scale and profitability may further increase. Furthermore, if Tether's aggressive diversification strategy (such as entering fields like AI and energy) is successful, it could provide the company with new growth drivers. Therefore, from an optimistic perspective, a valuation of $500 billion represents a possible future for Tether, potentially enabling it to become a "digital finance giant."

On the other hand, potential risks and uncertainties make this valuation aggressive. Tether's profitability is extremely sensitive to the macro interest rate environment, and the current interest boom cannot last forever. If external conditions change, Tether's profitability could be significantly reduced. A greater concern lies in regulatory constraints. As detailed above, major economies are tightening their oversight of stablecoins. Whether Tether can successfully overcome compliance barriers directly determines its future survival and development. The $500 billion valuation implicitly assumes that Tether can successfully mitigate regulatory risks, but this is far from guaranteed in reality.

Overall, Tether's pursuit of a valuation exceeding the sky-high valuations of OpenAI, ByteDance, and others represents a bold test by the capital market of the prospects of leading crypto companies. It reflects both market confidence and enthusiasm, but also reveals diverging risk appetites among investors. When assessing the fairness of this valuation, we must maintain a rational balance: recognizing Tether's current strong performance and strategic ambitions while also acknowledging the unique risks of its industry. Whether a $500 billion valuation is justified ultimately depends on whether Tether can demonstrate the long-term robustness of its profit model and successfully mitigate external risks impacting its business. Only in this way can a high valuation transcend skepticism and become self-fulfilling; otherwise, market enthusiasm may be fleeting, and the high valuation unsustainable.