Tether Issues Major Debt Facility to Bitcoin Mining Company Northern Data AG
Tether, the issuer of the USDT stablecoin, is ramping up its involvement in Bitcoin mining by providing a significant debt facility to German-based BTC mining company Northern Data AG.
Debt Financing to Drive Further Investments
Northern Data AG has secured a 575-million-euro ($610 million) debt financing facility from Tether, as announced on November 2. The purpose of this facility is to drive further investments across Northern Data Group’s three business lines: Taiga Cloud (an AI cloud service provider), Ardent Data Centers, and Peak Mining (the mining business).
Focus on Hardware Acquisition and Scaling
The primary focus of these investments will be on acquiring additional hardware and scaling Bitcoin mining operations using liquid-cooling mining technology. The debt facility is unsecured and has a term until January 1, 2030.
Tether’s Loan Facility Plan
Tether’s Chief Technology Officer and CEO Paolo Ardoino explained that the loan facility will be drawn throughout 2024. He emphasized that it will not be part of Tether’s stablecoin consolidated reserves but will be covered using the company’s profits through a separate investment vehicle under the Tether Group.
Profit Retention Strategy
Ardoino highlighted that Tether has been retaining a significant portion of its profits within its reserves, which has allowed them to overcollateralize their stablecoins by up to 104%. The company has been achieving an average of $1 billion per quarter in net operating results due to high interest rates on U.S. Treasury Bills.
Tether’s Expansion into Infrastructure
In addition to the debt financing, Tether plans to reinvest a portion of its profits in data, energy, and peer-to-peer communications infrastructure, according to Ardoino.
Previous Investment and Tether’s Growth
Tether’s investment in Northern Data follows its acquisition of a stake in the company. In September 2023, Tether invested an undisclosed amount in Northern Data to support AI initiatives. The stablecoin company has been actively involved in Bitcoin mining operations, launching its own mining operations and introducing proprietary mining software.
Excess Reserves and Stablecoin Loans
Tether’s Q2 attestation from accounting firm BDO revealed an increase of $850 million in excess reserves, bringing the total to $3.3 billion. Despite efforts to reduce stablecoin loans to zero last year, it was reported that stablecoin loans surged in September 2023.
Hot Take: Tether Expands Influence in Bitcoin Mining Industry
Tether’s debt financing facility for Northern Data AG demonstrates its growing involvement in the Bitcoin mining industry. By providing substantial funding for hardware acquisition and scaling operations, Tether aims to leverage its profits and overcollateralized stablecoins. This move aligns with Tether’s strategy of diversifying its investments into infrastructure while maintaining a strong reserve base. As Tether continues to expand its presence in the crypto ecosystem, its influence on the stability and growth of Bitcoin mining is likely to increase significantly.
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