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Two companies account for 60% of Tether's circulating assets

Much of the daily traded volume of cryptocurrencies is due to stablecoins such as USDT.

Tether USDT
Two companies accumulate most of Tether's circulating assets. (Photo by @drawkit on Unsplash)

In Short

  • Tether has a total market value of close to USD 74 billion.

  • In the last two years, its market capitalization has grown 1,500 percent.

  • Tether seeks to comply with the FATF Travel Rule using Notabene software.

A report by the firm Protos, named "The Protos Papers," published last November 10, highlights that almost 60% of the Tether stablecoin (USDT) supply concentrates in the hands of two market makers: Alameda Research and Cumberland Global. Tether is a U.S. dollar-pegged stablecoin born in July 2014 as Realcoin, later named USTether and finally USDT. Over the past seven years, USDT has become a crucial part of the cryptocurrency ecosystem, enabling liquidity management and growth.


Protos traced the history of USDT transferred between Tether's treasury and third parties, which fall into three categories: market makers, funds, and companies and individuals. The total USDT transferred between those entities is $108.5 billion, including USDT, returned to the treasury.


The chart below shows the total transferred to market makers, funds, companies, and individuals. Market makers are independent firms that intervene as liquidity providers and facilitators of asset trading.

According to Proto's figures, $37.2 billion USDT has returned to Tether's treasury. If you subtract that figure from the total transferred to the earlier mentioned entities, you get $75.8 billion. According to CoinMarketCap, Tether's current supply is $73.86 billion, which yields a 2.5% discrepancy with Proto's figures.


Tether distribution
Market Makers account for 97% of the USDT supply. Source: Protos.


High concentration of USDT in the hands of Market Makers

According to the Protos report, Alameda Research, founded by FTX exchange CEO Sam Bankman-Fried, is the investment firm that received the most considerable amount of USDT from Tether's treasury. Alameda has acquired some $36.7 billion in USDT, which is equivalent to 33.8% of the total amount sent by Tether's treasury.


In the case of Cumberland Global, a subsidiary of investment the firm DRW, they acquired $23.7 billion in USDT, which is equivalent to 22% of the outbound volume from the Tether treasury. Then, the report highlights that Alameda and Cumberland have received 55.8% of all the Tether distributed in recent years.


Much of the regulatory attention in the U.S. focus on stablecoins. Tether, Binance USD (BUSD), and USD Coin (USDC) stablecoins are among the top five cryptocurrencies by daily traded volume. At the same time, USDT doubles bitcoin's daily traded volume, according to figures from CoinMarketCap.


Despite the doubts that USDT raises among regulators, market participants prefer this stablecoin over more tightly regulated stablecoins such as USDC and Gemini Dollar (GUSD). Also, USDT is far superior in traded volume than more decentralized stablecoins such as DAI (DAI) or TerraUSD (UST).


Three U.S. regulatory agencies, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the President's Working Group on Financial Markets (PWG), warn that stablecoins could become a common means of payment in the future.

Tether's shared data

Authorities made it mandatory to share user information shared for cross-border transactions greater than USDT1,000 between custodial platforms such as exchanges. Tether Holdings Limited announced that it would implement measures to comply with the Travel Rule.


Tether is implementing software that will enable them to comply with the Travel Rule and combat money laundering across its global network. The Financial Action Task Force (FATF) suggested these actions, as Tether revealed in a statement released on October 26.


The company explained that, with Notabene, the company behind the protocol that Tether will use, would "protect" users' information when transacting between cryptocurrency platforms, without anything leaking along the way. Notabene explains that its software includes a wallet that allows it to identify whether a transaction is coming from a personal custody wallet or by a third custodial party and determine whether the transaction complies with the Travel Rule.


Tether indicated that it would begin testing the solution compatible with various protocols and combat crime and money laundering in cross-border transactions between exchanges.

Tether to comply with FATF

Tether's announcement is a sign that it wants to comply with international regulators such as the FATF and thus try to shake off the narrative of irregularities in which it has allegedly been involved, especially in the United States.


Later in the press release, the company mentioned the FATF guidelines that require virtual asset service providers to meet the same standards as regulated financial institutions and those related to the Travel Rul [PDF].


"We are proud to lead the charge on behalf of all stable currencies to make a positive change towards protecting our customers," Leonardo Real, Tether executive.

Virtual asset service providers must accept The Travel Rule, including exchanges. The objective is to share information about users who perform transactions exceeding $1,000.


Although the FATF is an international body whose recommendations are not binding, i.e., it does not mandate laws as these are the responsibility of each jurisdiction, Tether has decided to comply with its guidelines. Member countries of the FATF group usually abide by the recommendations to avoid being sanctioned or being "blacklisted."


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