Tether’s Treasury Holdings: A Rise to Top Foreign Holder?

Based on current trends, investment activity, and data from the U.S. Treasury regarding international capital flows (TIC), stablecoin provider Tether is on track to potentially become one of the top five foreign holders of United States Treasury securities. A projection suggests this could happen by 2033, assuming a reasonable rate of growth in their Treasury portfolio.

This forecast hinges on Tether continuing to increase its holdings annually, while the threshold for the fifth-largest foreign holder continues to evolve.

As of June 30th, Tether reported approximately $127 billion exposed to U.S. Treasury investments. This breaks down into around $105.5 billion held directly in Treasury bills and an additional $21.3 billion in indirect holdings.

Currently, this places Tether as the 18th largest foreign holder of U.S. Treasuries. Notably, it was the 7th biggest purchaser during 2024.

Disclosures show that Tether’s net purchases for 2024 totaled $33.1 billion, averaging about $2.8 billion each month. Initial data from early 2025 aligns with this annual pace.

According to the U.S. Treasury’s data on major foreign holders, Japan held approximately $1.15 trillion in July 2025, making it the largest. Belgium ranked fifth with about $428 billion, a figure known to fluctuate from month to month due to custodial arrangements.

For comparison, the Federal Reserve’s balance sheet showed approximately $4.20 trillion in Treasuries in early October 2025. Treasury data indicates around $5.78 trillion in outstanding Treasury bills at mid-year, meaning Tether’s holdings represent about 2% of the total bill market.

These figures provide context for the size of the gap Tether needs to close and the overall capacity of the market it is tapping into.

The table below illustrates various scenarios for Tether’s potential climb into the top five:

These parameters take into consideration Tether’s recent purchase activity and the variability observed in the fifth-place ranking.

The model calculates based on publicly available data. Here’s a simplified explanation:

Let S0 be $127 billion at mid-2025.

Let r0 be the current net addition pace, $33.1 billion per year.

Annual net addition increase by a constant a each year, so Tether’s total after t years is S(t) = S0 + r0*t + 0.5*a*t^2.

The top five bar is not static, so let B(t) = B0 + g*t, where B0 is $428 billion and g is the average annual change in the fifth place threshold.

The crossing occurs when S(t) equals B(t).

The choice of g (growth of the fifth-place bar) is important because the fifth-place holder is subject to custodial flows which can move by significant amounts without a change in underlying end ownership. For example, Belgium’s year-over-year change into July 2025 was over $100 billion. A range for g is applied based on recent history, rather than a single outlier month.

For example, using a modest acceleration scenario (a = $5 billion per year squared), Tether would add $33.1 billion in the first year, then $38.1 billion in the second, and $43.1 billion in the third year, and so on.

If the fifth-place threshold grows slowly (g = $10 billion per year), Tether would likely reach the top five around 2032 to 2033. If the bar grows faster (g = $30 billion per year), the crossing shifts further out into the mid-2030s.

Without any acceleration in purchases, it would take approximately a decade to close the gap at the current pace. This timeline is highly dependent on the investment trends of nations like Belgium, the United Kingdom, and China, as well as changes in custodial practices.

The composition of the top holders can change due to the location preferences of offshore funds and banks who safeguard Treasuries for their clients. This helps to explain why Belgium’s position is more volatile than others like Japan, the United Kingdom or China.

Using a range for ‘g’ accounts for these fluctuations in the custodial channel, aligning the projection with its behavior throughout rate cycles and balance sheet shifts.

The model does not account for increased competition from new stablecoins, nor does it anticipate sudden changes in reserve composition or attempt to value any premium or discount on Tether’s indirect exposures arising from money market funds.

How Tether Could Become the Top Foreign Holder

A separate question is whether Tether could overtake Japan to become the single largest foreign holder. Using Japan’s July 2025 level of $1.15 trillion as the target, and the same accelerating purchase path for Tether, the estimated timeframe is longer and dependent on how Japan’s holdings change.

If Japan’s holdings increase by an average of $20 to $40 billion per year, an acceleration rate (a) of $5 billion per year squared would yield a crossing in the late 2030s to mid-2040s. Increasing that rate to $8 billion per year squared could move the window forward several years.

The math is simple: closing the approximately $1 trillion gap between $127 billion and over $1 trillion requires continuous issuance growth, sustained demand for bills and short-term securities at Tether’s scale, and an expanding stablecoin market to support continuous net reserve inflows.

The Federal Reserve’s own Treasury portfolio is above $4 trillion, making a top overall ranking unlikely for any private issuer within a foreseeable timeframe.

The dynamics driving these scenarios are observable in Tether’s disclosures and reserve structure. The reserve mix is concentrated in cash and Treasury bills with short maturities, and interest income generates additional returns that can be reinvested or distributed.

If Tether reinvests a portion of that income into bills and continues to grow its USDT issuance as its market share increases, the acceleration parameter (a) will remain positive over several years.

However, if demand for stablecoins slows or Tether allocates more resources to non-Treasury investments, the acceleration would decline towards zero, delaying the crossing in all these scenarios.

The Treasury bill market has the capacity to absorb further purchases, and the available float grows as the Department of the Treasury manages its cash balances. But program composition, specifically the balance between bills and longer-term securities, will impact how much incremental demand lands in the bill market.

So, Will Tether Really Breach the Top 5?

The fifth-place ranking isn’t just based on a country’s current account flows. Holdings are recorded at the location of the foreign holder, meaning that custodial centers can act on behalf of ultimate beneficial owners located in other countries.

This is why ‘g’ is treated as a range rather than a single point estimate.

For clarity, the headline’s 2033 crossing year represents a modest, documented acceleration of Tether’s purchases with a conservative estimate for the fifth-place threshold.

If Belgium’s holdings fall because of custodial shifts, the crossing could occur earlier. If other hubs accumulate holdings more quickly, or offshore funds consolidate safekeeping in Europe, the crossing could be pushed out further.

The key question is whether the stablecoin market can support the reserve scaling implied by these scenarios.

Recent data indicates that the sector can fund several tens of billions in net new bills per year to private, non-bank balance sheets.

This pace, in combination with retained interest earnings and USDT issuance growth, provides the base case for a positive acceleration.

The main uncertainty lies with the moving fifth-place target, not the availability of supply. The overall scale of foreign official and private holdings, plus the Federal Reserve’s balance sheet level, provides context for Tether’s target and make the scenario into a practical set of numbers.

Based on Tether’s Treasury position and net purchases, reaching a top-five ranking by 2033 is possible, given continued growth in annual net purchases and a fifth-place threshold within the projected historical range.

Disclaimer: This analysis is based on publicly available information and involves projections that are subject to change. This is not financial advice.

Mentioned in this article: Tether, U.S. Treasury, Federal Reserve