Author: MD
Produced by: Bright Company
At the end of May, during the global Bitcoin conference, Tether's CEO Paolo Ardoino was interviewed by CNBC.
In his speech at the Bitcoin conference, Paolo Ardoino stated that USDT has about 420 million users in emerging markets and developing countries, accounting for 62% of decentralized trading volume. 'More significantly, about 35% of USDT users use it as a savings account—because they live in countries where the local currency is severely devalued, like Turkey, Argentina, and Vietnam—they can only choose to save in dollars, and USDT is their most realistic option.'
According to Coingecko data on June 18, USDT's overall market value is about $155 billion, with a trading volume of about $27.7 billion in the past 24 hours, making it the world's largest stablecoin issuer; the recently listed 'first stablecoin stock' Circle (CRCL.US) has an overall market value of about $61.5 billion, with a trading volume of about $9.2 billion in the past 24 hours.
However, market analysis suggests that under the framework of the (Genius Act) (i.e., the Act to Guide and Establish the National Innovation Framework for Stablecoins in the United States, which was passed by the U.S. Senate on June 17, pending review by the House of Representatives), Tether's compliance level is lower than Circle's, which is one of the reasons Circle prioritized listing over Tether. Paolo Ardoino also addressed questions regarding 'offshore structures' and audits during the interview, stating that they have had good communication with the Big Four accounting firms, but he also mentioned that 'this will be a long journey.'
It is worth mentioning that Paolo Ardoino specifically shared the logic behind Tether's investments in agriculture, dairy, as well as technology companies like video platforms and brain-machine interfaces.
According to Tether's website, Tether announced the acquisition of Latin American agricultural company Adecoagro on April 30 this year, which primarily produces sugar, ethanol, dairy products, and crops in Argentina, Brazil, and Uruguay, with 210,400 hectares of farmland and several industrial facilities in these countries.
In response, Paolo Ardoino stated in the interview, 'We are still exploring how to show agricultural enterprises and commodity producers (like wheat, rice, milk, etc.) how to use stablecoins for international trade. For example, Adecoagro sells products to Asia and the United States, and to make these sales more efficient, they are considering using stablecoins for transactions.'
Tether recently announced an investment in which it acquired 31.9% of Canada's gold royalty company Elemental Altus Royalties on June 12. Tether stated that this investment is part of its commitment to 'integrate long-term stable assets like gold and Bitcoin into its ecosystem,' serving both as a hedge and part of its commitment to building resilient digital economic infrastructure.
The following is the interview text compiled by 'Bright Company' (with omissions):
Host: Tether is one of the companies with the highest profits per employee in the world. Before we delve into the stablecoin strategy and some of the work you are doing, I am interested in some of your recent investments, including your investment in a dairy company in Brazil. So please talk about your investments in artificial intelligence and neuroscience, as well as your long-term outlook on dairy and milk.
Paolo: First, thank you for your invitation. From the outside, people might think we are doing random things, but that is not the case.
Host: When you have a lot of capital, you must invest wisely, which is why I want to know what you are doing.
Paolo: In the past two and a half years, we have created $20 million in profit. You must think carefully and devise very precise investment plans. We receive almost hundreds of investment projects every day, so we must be selective. Part of the investments—by the way, these investments are outside the stablecoin reserves, to clarify—our portfolio includes a portion of long-term safe investments, such as land and agriculture. Tether is known for creating and owning the largest stablecoin in the world; the USDT stablecoin is a tool that brings stability to people, communities, and countries. We bring stability to countries where the local currency is extremely weak, such as the Argentine peso or the Turkish lira, so stability is at our core. And for long-term stability for humanity, there is nothing more stable and necessary than land and agriculture.
The reason we invested in Adecoagro - a publicly listed company and the largest single landowner in Argentina, Uruguay, and Brazil - is that we want our portfolio to touch 'real Bitcoin' - land, as land is scarce and cannot be created more. Of course, you could say go to Mars to create more land, but in reality, humanity will always need land, and good agriculture to survive and develop. This is why we allocate part of our portfolio to land businesses. In addition, we are also exploring how to show agricultural enterprises and commodity producers (such as wheat, rice, milk, etc.) how to use stablecoins for international trade. For example, Adecoagro sells products to Asia and the United States, and to make these sales more efficient, they are considering using stablecoins for transactions. This is a very attractive way, as we believe that commodity trading companies will become the biggest driving force for stablecoin adoption in the next five years.
Of course, we have more investments in new technology types, such as artificial intelligence or biotechnology. I really like these fields because I am essentially a geek, so we invested in Northern Data. We are the major shareholder of Northern Data, which might be the largest independent AI infrastructure provider in the world. By independent, I mean not Google, not Microsoft, not Amazon. They have 24,000 GPUs, and we plan to utilize these resources at Tether to develop our own AI models in the future. We are building our own AI platform at Tether. We have also invested in biotechnology and neuroscience, especially in a company I really like, Blackrock Neurotech, which could be considered a competitor to Neuralink; in fact, Neuralink is more like their competitor. We are creating the world's most advanced brain-machine interface, capable of reading 90 words per minute from the human brain. If you think about the speed of words, this is almost close to the speed at which normal people speak. I believe this will be one of the most important technologies for human survival in the future because as AI and robots become so advanced, I believe humanity will need a mathematical coprocessor in the brain to remain relevant and compete with artificial intelligence and robots. We have also invested in other companies, such as Rumble, which is a very excellent video platform, very competitive and comparable to YouTube, and is developing very well, now with 60 to 70 million users.
Host: Your portfolio is very strong. But your core business controls over 60% of the stablecoin market. We see that the (Genius Act) has made some progress on Capitol Hill but has encountered some resistance from Senate Democrats. David Sacks from the White House said he remains very optimistic that this bill will pass (it was passed by the Senate on June 17). My question is, once there are clear rules, what will the competitive landscape look like, assuming a large number of new stablecoins enter the market? We have seen this situation in the past few years, for example, when Paypal launched its own stablecoin, but its market value is still below $1 billion, making it difficult for many to compete with Tether. USDC is currently in second place, but there is still a gap between you and them. So how do you view the changes in the competitive landscape following policy changes?
Paolo: I love competition. But I believe competition will primarily focus on competing with our second-largest competitor, Circle, rather than us. The reason is that all companies announcing their intention to create stablecoins come from the traditional financial system. The success of USDT lies in our understanding that there are 3 billion people in the world without bank accounts. These people are not bad; they are very good, just overlooked by banks due to poverty. To attract banks, you need to contribute at least $150 in fees and commissions annually. But if you live in a country with a per capita daily wage of $1.34 or in Africa with a monthly salary of only $80, you simply cannot give the bank $150 in a year. Therefore, the stablecoins created by traditional financial companies will only be offered to their existing customers. We serve the 3 billion people—this demographic is regarded as a 'niche market' by the banking system. Many competitors say that Tether serves the 'niche market' of banks, but half of the world's population should not be called a 'niche.' We were built through 'ground pushing.' We have established many service kiosks in Africa, and by 2030 we will have 100,000 kiosks in African villages, providing electricity through solar panels. We have already established hundreds of thousands of touchpoints in Latin America, providing education on stablecoins and Bitcoin.
Host: I have always been curious because Tether has always placed great emphasis on offline payments, allowing users to pay with stablecoins from their crypto wallets using their mobile phones. However, many places in the world are still cash economies. So stablecoins are indeed important in terms of lack of bank services, transfers, and secure storage, especially in high-inflation economies. But are people really willing to pay with cryptocurrencies in physical stores?
Paolo: Increasingly willing. We now have about 420 million users, adding 30 million new wallets each quarter, almost like Facebook back in the day. This proves that money is the best social network. In fact, even in the poorest countries, more and more people can buy inexpensive but still functional smartphones for wallets. Through word-of-mouth, our user base is growing rapidly. All competitors focus on institutional clients, while we have built millions of touchpoints that connect with the real world. We started from the streets, not the ivory tower.
Host: Speaking of which, I met a great developer in South Africa, Kgothatso Ngako, who integrated Lightning into mobile payments, allowing people to send Bitcoin via SMS without needing data. Is this technology similar to what you are doing, allowing people to operate without data terminals?
Paolo: We support many such terminals that can accept Bitcoin Lightning payments and USDT stablecoin payments. This is one of our different exploration directions. At the same time, establishing service kiosks in Africa allows us to directly reach people in villages who receive remittances (for example, remittances from Europe or the United States) and teach them to store funds on smartphones, and then they will pass on the knowledge to everyone in the village. We rely on word-of-mouth communication, testing our technology in the smallest and most remote villages in Africa. If it works there, it will work elsewhere.
Host: You welcome competition and are not worried about new players entering the market. I recall (Wall Street Journal) reports that major Wall Street banks are considering launching a unified digital dollar, such as JP Morgan, Citibank, etc., but they will compete for Circle's market share, as Tether focuses on emerging markets.
Paolo: We are working hard on the streets every day, and we have a full team for education and collaborating with local partners. JP Morgan will never go to a small village in Africa to teach people how to use their stablecoin. That is our daily routine. JP Morgan and these companies will only sell stablecoins to the already wealthy. This is why I believe stablecoins are 'the icing on the cake' in the U.S., but not a necessity. In the U.S., you have a dozen payment methods; competition is very fierce, and the payment network is the best; the U.S. dollar is the best payment rail. But outside the U.S., everything is not so good; people are eager to have U.S. dollars, but cash dollars are increasingly hard to come by. Therefore, the best way for people to hold dollars is USDT. But no one is paying attention to this market, only us.
Host: Have you ever thought about leaving the Cayman Islands, considering the scale Tether has reached today?
Paolo: In fact, we have already moved from the BVI (British Virgin Islands) to El Salvador; our company is now registered there. El Salvador is currently the only country with a comprehensive and intelligent regulatory framework for stablecoins. The stablecoin regulation in Europe (MiCA) is very poor. They require stablecoin issuers to keep 60% of their reserves in uninsured cash deposits. Look at what happened to our main competitor in 2023 with Silicon Valley Bank; they had $3 billion in uninsured cash deposits at Silicon Valley Bank, and the bank collapsed, nearly killing our competitor, who was later saved by the FDIC. So stablecoins were saved. But you should buy Treasury bonds instead of holding uninsured cash. The MiCA license requires you to hold uninsured cash, so we decided not to apply for it because it is a bad license. El Salvador now has the most comprehensive and secure regulatory system. The U.S. will soon catch up and have a good regulatory system. Until then, we can only play the hand we are dealt.
Host: I previously spoke with Bo Hines, who is the head of the White House Council of Advisers for Digital Assets. He said Tether is the seventh largest buyer of U.S. Treasury bonds and one of the highest historical holders. Once the Genius Act or other stablecoin legislation passes, the demand for U.S. Treasury bonds will surge overnight.
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Do you have any concerns about the (Genius Act)? Do you support other ongoing legislation?
Paolo: I think the (Genius Act) is reasonable and comprehensive. It is very important to establish appropriate rules for stablecoins because they are the most powerful application of blockchain technology.
Host: Currently, Tether regularly publishes self-proof reports regarding the transparency of its books. Will you disclose more in the future? After all, there have been some controversies and settlements in the past.
Paolo: It needs to be clarified that no stablecoin issuer, or rather, no meaningful stablecoin issuer has conducted a full audit of reserves; all stablecoin issuers—including our largest competitors—have only done self-proofs. The media used to always pick on us, but this is not Tether's problem; all major stablecoin companies have not done complete audits, only self-proofs. Let me explain, in 2022, Senator Warren sent an open letter to all auditing firms saying not to touch cryptocurrencies. At that time, the OCC (Office of the Comptroller of the Currency) was also trying to suppress cryptocurrencies. The situation has changed now, but in the past, the Big Four audit firms could not sit down and talk with stablecoin companies, not just us; other companies faced the same issue. Now the government's attitude has changed, and they are starting to embrace cryptocurrencies.
In the past one and a half months, we have started very positive dialogues with some of the Big Four; it will be a long process, but it is currently very positive at least to start the conversation. We have open discussions with them. I am very confident we will achieve full audits. I love transparency; I am the most transparent person in the company. If you look at our self-proofs, they are more detailed than those of competitors, disclosing all different categories of investments, revealing how much gold, Bitcoin, and other assets we have, how many government bonds. Last year, we conducted due diligence for more than two years; an American institution spent two years conducting the largest-scale due diligence on our reserves, turning over every stone. The results of the due diligence will be made public in early 2024, confirming the authenticity of our reserves. They conducted checks in January and May. I also disclosed all processes and reserves to the New York Attorney General over two years as part of a settlement. We are the most scrutinized company in the world. I know our company is very transparent and sets an example for the entire industry, and I am also correcting many misunderstandings about us from the outside world.
