Its not entirely obvious what they "should" do with the fiat they make selling their token. They could invest it something safe like treasuries and keep the interest for themselves. But even treasuries could go down in value and if there are enough withdrawls they'll have to sell it at a loss.
Or they can invest in money market funds, or similar short term investments. Or commercial paper (unsecured short term debt). From what I read, they invested a lot in commercial paper to Chinese companies. It's all a game to eek out a slightly higher yield.
They face the same problem as any bank. Except banks have a regulatory framework that tells them exactly how much they can invest and in what, and every decade or so the bank gets bailed out.
Or they can invest in money market funds, or similar short term investments. Or commercial paper (unsecured short term debt). From what I read, they invested a lot in commercial paper to Chinese companies. It's all a game to eek out a slightly higher yield.
They face the same problem as any bank. Except banks have a regulatory framework that tells them exactly how much they can invest and in what, and every decade or so the bank gets bailed out.