Tether Explores Tokenizing Equity to Provide Investor Liquidity, Report Suggests

Tether may tokenize equity to ensure liquidity for investors: Report

Tether, the company behind the USDt stablecoin, is considering the tokenization of equity to enhance liquidity for its investors as it aims for a $500 billion valuation. The move comes amidst discussions for substantial funding and highlights the growing importance of tokenized assets in the financial landscape.

Key Takeaways

Tether is looking at tokenizing investor equity and share buybacks to enhance liquidity.
Recent reports indicate Tether has halted a shareholder's stake sale while securing funding.
Tokenized equity can boost liquidity and enable the use of shares as collateral in decentralized finance (DeFi).
The U.S. SEC is moving towards tokenized financial products, supporting the trend.

Tether's Plans for Enhanced Liquidity

Tether, the issuer of the USDt dollar-pegged stablecoin, is considering the tokenization of investor equity and share buybacks as a means to offer liquidity for investors. This initiative aligns with the company's ambition to achieve a $500 billion valuation. As reported by Bloomberg, Tether recently intervened to prevent an existing shareholder from selling their stake while discussing plans to raise $20 billion for a 3% interest in the stablecoin issuer’s business. The share sale would have valued Tether at around $280 billion. Following the funding round's completion, Tether intends to provide liquidity options for investors through either tokenization or share buybacks.

Cointelegraph attempted to reach Tether for further comments but did not receive a response prior to publication.

Understanding Tokenized Equity and Its Advantages

Tokenizing a company's equity can significantly improve liquidity by making shares easier to transfer, fractionalize, and leverage. This approach allows holders to maintain their ownership while using a tokenized version of their equity as collateral for transactions within decentralized finance (DeFi) applications.

Tether, Stablecoin, Tokenization, RWA Tokenization Differences between tokenized equity and shares issued through traditional financial channels. Source: Cointelegraph

Related: Tether's solvency concerns are unwarranted as the company maintains a substantial surplus: CoinShares

Growth of Tokenized Finance in the U.S.

In recent developments, the U.S. Securities and Exchange Commission (SEC) approved the Depository Trust and Clearing Corporation (DTCC) to start tokenizing stocks, exchange-traded funds, and bonds. SEC Chair Paul Atkins stated, “U.S. financial markets are set to transition onchain,” emphasizing that onchain markets will enhance predictability, transparency, and efficiency for investors.

Tether, Stablecoin, Tokenization, RWA Tokenization Source: Paul Atkins

On the same day as Atkins’ announcement, J.P. Morgan facilitated a $50 million tokenized bond issue for Galaxy Digital Holdings. This move indicates that financial services are increasingly recognizing the potential of tokenized products.

Additionally, cryptocurrency exchanges are preparing to broaden their offerings of tokenized products. Coinbase, a U.S.-based crypto exchange, is anticipated to announce its entry into tokenized stocks and prediction markets soon. The company is expected to host a livestream to reveal new products but has not disclosed specifics.

Currently, the tokenization of public stocks is still developing, with nearly $700 million worth of public equities having undergone tokenization, according to data from RWA.xyz.

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