Tether's 2025: Profits Fall, Loans Rise Amid Growing Regulatory Scrutiny

Tether's latest quarterly report reveals a stark shift in the stablecoin giant's financial health: profits plummeted while secured loans surged to over $17 billion by December 2025. The developments come as both Tether and rival Circle face mounting criticism from New York prosecutors for inadequate assistance to crypto crime victims, despite growing regulatory oversight through the new GENIUS Act framework.

Background and Context

Tether, the issuer of the world's largest stablecoin USDT with $186.5 billion in circulation, continues to rely on quarterly attestations rather than full audits for its reserve reporting. The company's latest figures, verified by BDO Italia, represent only a single-day snapshot as of December 31, 2025. This reporting approach has drawn persistent criticism from regulators and transparency advocates who note that formal audits have repeatedly been promised but never delivered.

The stablecoin landscape operates under an evolving regulatory framework, including last summer's GENIUS Act, which established new compliance requirements for stablecoin issuers operating in U.S. markets. The legislation mandates cooperation with law enforcement requests to freeze assets linked to criminal activities, though critics argue it lacks specific provisions for returning stolen funds to victims.

Key Figures and Entities

According to the attestation report, Tether's CEO Paolo Ardoino has positioned the company as increasingly cooperative with U.S. authorities, claiming Tether has frozen $3.5 billion in USDT linked to scams and hacks. However, New York Attorney General Letitia James, Manhattan District Attorney Alvin Bragg, and three other district attorneys allege in a letter to Democratic senators that both Tether and Circle "affirmatively decide to keep stolen funds and proceeds under their control rather than returning them to victims."

The reserves backing USDT are reportedly custodied by Cantor Fitzgerald, whose founder Howard Lutnick—currently serving as U.S. Commerce Secretary—has faced scrutiny over his business ties to Tether. Lutnick's firm holds a convertible bond with Tether worth approximately 5% of the company, raising questions about potential conflicts of interest. Recent revelations from the Department of Justice showing Lutnick's continued contact with Jeffrey Epstein until 2012 have further complicated Cantor Fitzgerald's role as Tether's custodian.

At Circle, Chief Strategy Officer Dante Disparte has defended the company's practices, stating that Circle "has always prioritized financial integrity and advancing U.S. and global regulatory standards for stablecoins." However, prosecutors claim Circle's policies "are significantly worse than those of Tether for victims of fraud," noting that Circle was holding $114 million in frozen USDC as of November 2025 while continuing to earn interest on the underlying Treasury bills.

Legal and Financial Mechanisms

Tether's reserve composition shows significant shifts in Q4 2025, with U.S. Treasury bills increasing to $122.3 billion from $112.4 billion in Q3. The company eliminated $6.4 billion in money market funds while growing term reverse repurchase agreements by $2.5 billion to $5.5 billion. Precious metals holdings rose by over one-third to $17.45 billion, though Tether's $24 billion gold position suffered a 20% value decline following sharp price volatility in January.

The most controversial element remains Tether's secured loans, which increased by $2.4 billion in Q4 alone, bringing the total to $17 billion. This represents nearly $7 billion in new loans during the second half of 2025, despite Tether's 2022 promise to eliminate such lending. The company claims these loans are "over-collateralized by liquid assets subject to margin call and liquidation mechanisms," but with Tether's equity standing at only $6.4 billion—just over one-third of the loan total—questions persist about the adequacy of collateral, particularly given the 40% decline in Bitcoin and 50% drop in Ethereum since October 2025.

The declining quality of Tether's reserves prompted S&P Global to label USDT's stability as "weak" in December, warning that further declines in non-cash assets could leave the stablecoin undercollateralized. Meanwhile, Tether reported $10 billion in net profits for 2025, down from $13 billion in 2024, with Q4 profits collapsing to just $30 million after accounting for Bitcoin losses offset partially by gold gains.

International Implications and Policy Response

The regulatory response to stablecoin risks varies significantly across jurisdictions. Visa CEO Ryan McInerney acknowledged stablecoins' "tremendous growth and disruption potential" but stated plainly that "we don't see a lot of product market fit in developed digital payment markets like the United States or the UK or Europe for stablecoin payments." This assessment contrasts sharply with the continued growth of stablecoin usage in emerging markets and trading contexts.

Tether has attempted to distance its international USDT operations from its new U.S.-compliant USAT token, issued through Anchorage Digital, the first crypto firm to receive a U.S. national bank charter. The separation reflects growing pressure on offshore stablecoin issuers to either comply with U.S. regulations or cede market share to compliant competitors. However, the New York prosecutors' letter suggests that mere compliance with freeze orders may be insufficient without clear requirements for victim restitution.

Meanwhile, Ark Invest's DeFi Quarterly report reveals that USDC maintains dominance in decentralized finance despite representing only about one-quarter of overall stablecoin market capitalization. USDC's 60% share of adjusted stablecoin transaction volume helped Base network surpass Ethereum and Tron in Q4 2025 with approximately $3 trillion in stablecoin volume, highlighting how regulatory compliance may influence network effects in the evolving stablecoin ecosystem.

Sources

This report draws on Tether's Q4 2025 attestation report from BDO Italia, the GENIUS Act legislation, letters from New York state prosecutors obtained by CNN, TechCrunch's profile of Paolo Ardoino, Visa's earnings call transcript, Ark Invest's DeFi Quarterly report, and previous New York Attorney General actions against Tether.