Tether Considers Tokenizing Equity As It Seeks $20 Billion in Fundraising

Stablecoin issuer Tether is considering tokenizing its equity upon completion of its planned  $20 billion fundraise. This would allow existing shareholders to exit before the company goes public via an initial public offering.

This plan is a reaction to the attempt by some early investors to sell before the fundraise, as the Tether IPO timeline remains unknown.

Potential Secondary Sales Threaten to Detail Tether’s $500 Billion Dream

According to Bloomberg, Tether had to intervene to prevent some of its current shareholders from selling their stake before the raise. The USDT issuer is targeting $20 billion in fundraising at a valuation of $500 billion.

However, there are reports that at least one shareholder was ready to sell at a discount. A shareholder reportedly planned to divest at least $1 billion worth of stock in a deal that would value Tether at $280 billion.

The firm claimed that the shareholders have now committed to not selling their stake. While it did not specify who these shareholders were, the stablecoin issuer said allowing such a deal to happen would be imprudent.

It said:

In order to address the concerns of these shareholders, Tether is now mulling multiple options, including tokenisation. Another option that is being considered is share buyback.

While the firm has not decided on how to enable divestment for early investors, tokenization would be an interesting choice. The firm already owns Hadron, a tokenization platform launched in 2024, which could be used for such purposes.

SEC Issues No Action Letter on Tokenization

Meanwhile, Tether tokenization plans are underway, with the US Securities and Exchange Commission (SEC) having given its approval for tokenisation. The SEC recently issued a no-action letter to the Depository Trust Company (DTC) allowing it to tokenize traditional securities in a pilot project.

DTC, which is a subsidiary of Depository Trust and Clearing Corporation (DTCC), plans to enable tokenization of several financial instruments for its participants in the pilot project. These include indexes such as the Russel 1000, ETFs, Treasury Bills, Bonds, and others.

With the letter, the SEC has now stated that it would not take any legal action against DTC for the pilot. It is a signal of the regulator’s welcoming attitude to crypto and blockchain technology. The SEC is already planning to issue innovation exemptions for some crypto projects by next year.

Speaking on the no-action letter, SEC Commissioner Hester Pierce stated that it is a step toward bringing the markets on-chain. She wrote:

“Although this program is a pilot subject to various operational limitations, it marks a significant incremental step in moving markets onchain. DTC plays a central role in our securities markets. I am looking forward to seeing how DTC’s participants benefit from this program and the extent to which DTC’s tokenization model can enhance the functioning of our securities markets.”

Despite the SEC’s positive attitude to tokenization of public securities, it is unclear whether it will maintain the same stance on private equity as Tether is considering.