Ninety-eight percent of all stablecoins in circulation are denominated in US dollars.

Every time a European institution settles in USDT or USDC, it deepens its dependency on American financial infrastructure.

The ECB noticed.

In March it warned that dollar stablecoin growth risks weakening eurozone monetary policy and could shift deposits away from European banks at scale.

The response from European banking was not to lobby against stablecoins.

It was to build their own.

Ten institutions, including ING, UniCredit and BNP Paribas, have announced Qivalis, a euro-denominated stablecoin expected in the second half of 2026.

A euro stablecoin issued under MiCA standards gives European treasurers a fully compliant alternative to dollar rails for intra-European settlement.

This is not a fintech experiment. This is the European banking establishment deciding that if stablecoin rails are the infrastructure layer of global finance, they want their own line.

The growing number of global users have been saying it for years.

Now the IMF has said it with a spreadsheet.

A working paper published by the International Monetary Fund in March 2026 analysed the stock price movements of incumbent payment firms around the passage of US stablecoin legislation.

The conclusion was unambiguous.

US legislation supporting the use of stablecoins in payments reduced the market value of listed incumbent payment firms by 18%, approximately $300 billion.

Not projected. Not modelled in theory.

Priced by the market in real time.

The impact was proportionally larger for incumbents focused on cross-border payments, and smaller for those protected by network effects or already offering crypto-related services.

The firms most exposed to stablecoin disruption have already been marked down by the market. And with stablecoin usage continuing to grow despite depressed crypto asset prices, expect that to continue.

Central banks don't issue warnings lightly.

In March 2026 the European Central Bank published a paper warning that dollar-denominated stablecoin growth risks weakening its monetary policy transmission and could accelerate deposit outflows from European banks at scale.

The institution responsible for monetary stability across the world's second largest economic bloc is formally modelling what happens to European banking if dollar stablecoins continue their current growth trajectory.

The ECB's concern is not theoretical. It is structural.

Dollar stablecoins don't just compete with the euro.

They quietly replace it in the corridors where the ECB has least visibility.

In a political and economic world that is fragmenting quickly and with the Eurozone re-arming at the fastest pace since the Cold War, this is a reminder of the importance of monetary sovereignty.

Tether is one of the most profitable private companies in the world.

Their remarkable success has produced two outcomes:

To understand why, you need to understand what Tether actually is.

Not what the crypto press says it is.

Not what the Senate Banking Committee says it is.

What it actually is.

THE MODEL

Pure simplicity…

That is the entire business model.

No branches. No loan book. No trading floor.

No wealth management division.

No investment bank.

No credit card portfolio.

No 213-page annual report explaining forty-seven different revenue streams.

Just dollars in.

Treasuries held.

Yield differential monetised.

In 2025, that model generated net income of $10 billion with around 300 employees.

UBS, with 129,000 employees and the most sophisticated wealth management operation on earth, made $7.8 billion over the same period.

That’s a 550x difference in profitability per employee.

THE NIM NOBODY IS TALKING ABOUT

Every bank treasurer, CFO or analyst reading this knows what NIM is.

Net interest margin.

The spread between what a bank earns on its assets and what it pays on its liabilities.

The number that moves share prices, determines executive bonuses, and occupies the first three slides of every bank analyst presentation.

When I was running treasury operations, all conversations led to the NIM.

Rate cycles? What does it do to the NIM?

Deposit betas? How does it affect the NIM?

Funding mix? How does that change the NIM?

Everything came back to the margin.

It echoed the iconic scene in Goodfellas where the restauranteur learns the brutal truth of being in business with the mafia.

Business bad? F*ck you, pay me.

Oh, you had a fire? F*ck you, pay me.

Place got hit by lightning, huh? F*ck you, pay me.

So let’s look at Tether's NIM from a treasury perspective.

Tether's assets yield approximately the current US Treasury rate.

At prevailing rates, that is somewhere between 4.2% and 4.5% on $185 billion of holdings.

Tether's cost of funds is zero.

Not low. Not competitive.

Zero.

Every USDT holder is an unsecured, zero-coupon creditor who has voluntarily funded Tether's Treasury position in exchange for dollar liquidity on a blockchain.

The NIM is therefore approximately 4.2% to 4.5%.

Compare that to the real world.

JPMorgan, the best-run large bank on earth, operates at a NIM of around 3.06%.

Bank of America runs at approximately 2.21%.

Wells Fargo at around 2.86%.

These are institutions with armies of asset-liability managers, rate derivatives desks, and deposit pricing committees working around the clock to defend those margins.

Tether easily beats their NIM with 300 people.

The reason is structural and it will not change.

Traditional banks pay deposit rates.

They have to.

Competition, regulation, and customer expectations force their hand.

The moment a competitor offers 10 basis points more on a savings account, deposits walk.

USDT holders receive nothing and accept it gladly.

Because what they are buying is not yield.

It is dollar access, settlement speed, and 24/7 liquidity on a blockchain.

It’s competing with a dollar banking system that is not only slow but that cannot reach areas where synthetic dollar demand is huge.

That is a completely different market with completely different pricing dynamics.

It’s the businessman in Argentina looking to store household wealth in synthetic dollars to escape ruinous inflation.

It’s the offshore Filipino workers looking to avoid predatory payment providers when sending money home.

It is state-linked oil companies in sanctioned countries looking to avoid the SWIFT system altogether as the world increasingly deglobalizes into separate spheres of influence.

This is why the GENIUS Act prohibition on stablecoin issuers paying yield to holders was fought so hard by the banking lobby.

If Tether could legally pass yield to USDT holders, the deposit competition would be immediate and brutal. Every money market fund manager in the world would need to reprice overnight.

Congress drew the line.

Tether's zero cost of funds is structurally protected.

Other stablecoin issuers must seek ways to pass on rewards to holders through partnerships and rewards structures that are GENIUS and CLARITY Act compliant.

TETHER’S STRUCTURAL SHORT

There is one structural risk in this model and it is significant.

Tether is structurally short interest rates, meaning it benefits when rates rise.

When rates fall, the yield on $185 billion of Treasury holdings declines. Every 100 basis points off their aggregate treasury investment rate is approximately $1.85 billion off Tether's annual gross income.

The converse is also true, and more pertinent in the context of the energy shock underway due to the US-Israeli attack on Iran and the closure of the Strait of Hormuz.

At the current rate level, the model prints $10 billion a year.

At 200 basis points lower, which is not an extreme scenario in a recessionary environment, gross income falls by approximately $3.7 billion.

The business still works.

But it is a materially different business.

This is the strategic vulnerability that Tether's fundraising activity is partly designed to address.

Diversification away from pure Treasury carry requires capital.

Scaling into new product lines requires capital.

Competing with bank-issued stablecoins in a lower rate environment requires capital.

Which brings us to the KPMG story.

ENTER KPMG

In March 2026, Tether engaged KPMG to conduct the first full audit of its $185 billion USDT reserves.

PwC was brought in simultaneously to prepare internal systems.

This is not routine corporate hygiene.

Tether has spent a decade resisting exactly this level of scrutiny.

Its previous disclosures were attestations, not audits.

Narrow, limited engagements that confirmed reserve balances existed without examining their composition, quality, or the integrity of the systems producing them.

The CFTC fined Tether $41 million in 2021 specifically because its attestations had misrepresented the reserve composition. Commercial paper, loans to affiliated entities, and other assets had been presented as dollar equivalents when they were materially less liquid.

The New York Attorney General extracted a separate $18.5 million settlement the same year. The NYAG found that Tether had used USDT reserves to cover an $850 million loss at affiliated exchange Bitfinex without disclosure.

That is the baseline from which KPMG is now being asked to issue a clean opinion.

So why now?

Three reasons, and they are all about money.

First, the GENIUS Act.

Signed into law in July 2025, it created the first federal regulatory framework for payment stablecoins in the US.

Operating outside that framework is now a strategic liability.

JPMorgan, Bank of America, and every FDIC-insured institution can now apply to issue their own compliant dollar token.

Tether needs KPMG to stay in the same conversation as institutions your compliance team actually trusts.

Second, USAT.

In January 2026, Tether launched a GENIUS Act-compliant token through Anchorage Digital Bank under OCC supervision.

Tether as brand and technology. A federally chartered US bank as issuer of record. USAT targets US broker-dealers, corporate treasuries, and institutions navigating domestic compliance requirements.

A clean KPMG audit on USDT strengthens the credibility of everything in the Tether ecosystem.

Third, and most importantly, the fundraise…

THE $500Bn QUESTION

In late 2025, Tether was reported to be preparing a fundraising round of $15 to $20 billion.

At a valuation of $500 billion.

To put that in context. OpenAI is currently valued at approximately $300 billion.

ByteDance, owner of TikTok and one of the most valuable private companies on earth, sits at a similar level.

Tether at $500 billion would make it one of the most valuable private companies in history.

That fundraise is on hold.

Pending the KPMG audit.

Because no institutional investor with a fiduciary obligation is writing a cheque at that valuation without a clean Big Four opinion on the reserves.

The institutional memory of the CFTC fine and the Bitfinex cover-up does not disappear.

But it can be managed with a credible audit.

A clean KPMG opinion is therefore not just a compliance exercise.

It is the key that unlocks $15 to $20 billion of new capital at a half-trillion dollar valuation.

WHAT THIS MEANS FOR YOUR INSTITUTION

A clean KPMG opinion on $185 billion of reserves removes the last formal objection most compliance teams have carried against USDT exposure.

It does not erase institutional memory.

Some counterparty risk committees will require years of clean attestations before they are comfortable. That is a defensible position.

But the strategic question your treasury function should be asking is not whether to trust the old Tether.

It is whether the new Tether, with KPMG sign-off, a federally supervised US token, Cantor Fitzgerald as custodian, and the highest NIM of any financial institution on earth, is now a counterparty you can no longer afford to ignore.

In Goodfellas, Henry Hill didn't go into witness protection because he found religion.

He went because the legitimate world made him a better offer.

Tether has made the same calculation.

-Thanks for reading.

Mark McKendry, Stablecoin State

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