Myth of Decentralization | Tether’s Record Profit

A key cryptocurrency concept seems better in theory than practice.

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Nina Bambysheva Senior Reporter, Forbes Money & Markets
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Steven Ehrlich Director, Forbes Digital Assets
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THE MYTH OF DECENTRALIZATION

Never mind the recent rally, for a decade the crypto industry has been selling the promise of decentralization, a new financial system without middlemen, but many blockchain projects have recreated the very elements they tried to overthrow, and regulators are adamant about keeping the status quo.

Decentralization is “what you have to do if you are in crypto to attract new investors and get more legitimacy,” says Camila Russo, founder of The Defiant, a publication that focuses on decentralized finance. Much of the cryptocurrency business just mimics what already exists in traditional finance but with an alluring high-tech narrative. Read more.

TETHER REPORTS NEARLY $3 BILLION IN Q4 PROFIT

The issuer of the world's largest stablecoin said it reached a record $2.85 billion net profit in the fourth quarter of 2023 and set an all-time high increase in excess reserves backing its tokens.

Tether’s net profit for 2023 was $6.2 billion, of which nearly $4 billion was generated from interest on U.S. Treasurys, reverse repo and money market funds. The rest was attributed to the appreciation of other asset classes, including bitcoin and gold.

Tether had $5.4 billion in excess reserves at the end of last year, more than covering the outstanding $4.8 billion in secured loans that comprise part of the collateral for its tokens, according to its attestation report released on Wednesday.

CURRENT PRICE OF TOP 5 COINS (7-Day % Change)

Coin

Price

Percent Change

Bitcoin (BTC)

$42,864

2.4%

Ether (ETH)

$2,292

0.7%

Tether (USDT)

$1.00

0%

Binance Coin (BNB)

$300

0.8%

Solana (SOL)

$99

6.2%

Sources: Forbes Digital Assets, CoinGecko. Prices as of 2:01 p.m. on February 2, 2024.

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SOL REGAINS $100 LEVEL

The Solana blockchain's native token is back above the $100 mark. It rallied more than 30% since falling below $80 earlier this month, according to CoinMarketCap.

Analysts have attributed the rally to the growing use of growing use of the Solana network, notably on the part of decentralized physical infrastructure networks, blockchain projects that incorporate real-world infrastructure and rely on token reward systems for growth. Such systems include Hivemapper, which compensates drivers who install dashboard cameras for mapping projects, and the Helium mobile wireless project.

BITCOIN ETF WAVE REACHES HONG KONG

Hong Kong appears poised to soon welcome its own spot bitcoin exchange-traded funds. Last week, the local arm of Harvest Fund Management, a major Chinese asset manager, submitted the first spot bitcoin ETF application to the local financial regulator. Meanwhile, Hong Kong-based Venture Smart Financial Holdings said it aims to launch its vehicle within the first quarter and will also file an application.

CHRIS DIXON: CRYPTO WILL UNSEAT THE MAGNIFICENT SEVEN

In his new book, the founder of Andreessen Horowitz’s crypto division argues that tech titans like Meta, Alphabet and X have reaped monopolistic profits for too long. Despite setbacks, he thinks the disruptive aspects of crypto will ultimately prevail in limiting the power of Big Tech. Read his interview with Forbes Digital Assets research director Steven Ehrlich.

ELSEWHERE

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