Video Source: Tether Founder Reveals Truth About Reserves

Author: Anthony Pompliano

Translation: Deep Tide TechFlow

Paolo Ardoino is the Chief Technology Officer of Tether. In this conversation, Paolo and host Pomp will discuss the rise of stablecoins, fund management, ensuring the actual backing of the peg to the dollar, regulation and auditing, banks, FDIC insurance, and more, providing a comprehensive understanding of everything about Tether and stablecoins.

Host: Pomp, Anthony Pompliano

Speaker: Paolo Ardoino, Chief Technology Officer of Tether

Podcast Source: Anthony Pompliano

Original Title: "Tether Founder Reveals Truth About Reserves"

Episode: Link

Air Date: September 19th

The Rise of Stablecoins

Regarding the rise of stablecoins, Paolo mentioned that stablecoins were initially designed primarily for cryptocurrency traders to help them transfer fiat currency between different exchanges. However, with the outbreak of COVID-19 and the devaluation of national currencies, especially in emerging markets such as Turkey, Argentina, and Venezuela, stablecoins are increasingly seen as a lifeline for developing country communities.

Pomp noted that in the face of economic instability and currency devaluation, Bitcoin has long been seen as a solution, especially in countries facing economic hardship, where Bitcoin is seen as a safe haven. Paolo believes that although Bitcoin is relatively new compared to other traditional currencies, it is being widely accepted, representing ultimate financial freedom, and people need more time to understand and accept Bitcoin.

Pomp mentioned the existence of multiple USD-backed stablecoins in the market and the competition among them. Paolo believes that an industry cannot have only one player, diversity is a key factor, providing users with more choices, increasing industry resilience, and better resisting various risks.

Paolo further pointed out that diversity provides a good case for regulatory agencies. If the stablecoin industry had only one player, regulatory agencies might have reason to shut it down. However, diversity can demonstrate that this is a truly developing industry, not just a company's business.

Tether's Risk Management

Paolo explained that Tether places great importance on risk management and has a dedicated team responsible for monitoring the market and understanding the microeconomics. The team's main task is to continuously track market dynamics, ensure that Tether's investment strategy matches the market environment, and remain vigilant about potential risk factors. He emphasized that their team is very focused on protecting the portfolio.

Paolo mentioned that in 2022 and 2023, Tether faced a series of attacks, but at the same time demonstrated its strong liquidity and redemption capabilities, successfully redeeming $7 billion within 48 hours and over $20 billion in the following 20 days.

Paolo pointed out that considering $7 billion accounted for 10% of its reserves and $20 billion accounted for 25% of its reserves, this redemption capability is particularly outstanding. Tether successfully met a large number of redemption requests in a short period of time without significantly impacting its reserves.

Paolo discussed the role of FDIC insurance in stablecoins. He noted that while FDIC insurance provides some peace of mind for ordinary consumers, it is not a reliable solution for large companies like Tether. Tether prefers to use short-term US Treasury bonds because these bonds can be returned to holders in the event of bank bankruptcy.

Deep Tide Note: FDIC insurance is provided by the Federal Deposit Insurance Corporation (FDIC) in the United States. It covers various deposits but does not cover other financial products, primarily aiming to protect depositors' funds in the event of bank bankruptcy or other financial crises.

Diversified Investments of Tether

Regarding the source of Tether's profits, Tether currently has a market value of $83 billion and has accumulated over $3.3 billion in additional reserves in the past few quarters. Paolo pointed out that although the current high-interest rate environment is favorable for Tether, this situation will not last forever.

Paolo mentioned that Tether's portfolio holds about $1.5 billion in Bitcoin. Despite having over $3.3 billion in additional capital, even if the value of Bitcoin goes to zero, Tether still has funds exceeding the total value of its issued tokens. Additionally, Tether also holds gold as part of its reserves.

Paolo emphasized that the world is full of uncertainty, and Tether aims to provide additional protection for users by diversifying its investment portfolio. Considering the large amount of US Treasury bonds held in its reserves, the company is considering small-scale asset diversification.

Paolo mentioned that although Tether has publicly stated that it is undergoing an audit, the process has taken a long time for various reasons. Paolo emphasized that Tether is always committed to increasing its transparency and has made significant progress in improving transparency.

Diversified Development of Tether

Paolo pointed out that Tether's goal is to support blockchains with actual utility, and supporting too many blockchains would increase management complexity, especially when most of these blockchains have low transaction volumes. For example, Tether was initially issued on the OmniLayer, but over time, Tether began issuing USDT on Ethereum and later chose to issue on Tron.

In Africa and South America, due to high transaction fees on Ethereum, people tend to use Tron. Despite the availability of more second-layer solutions such as Arbitrum and Optimism, Tron remains the preferred choice for many users, providing them with simpler and low-cost transaction options.

Pomp mentioned that with the popularity of stablecoins, major banks and other financial institutions may enter this field. Paolo believes that major banks may collaborate to create a common stablecoin rather than each creating their own stablecoin. Central Bank Digital Currencies (CBDC) may face more challenges in Western countries, as they may replace cash and potentially lead to negative interest rates.

Paolo mentioned that Tether is expanding its stablecoin business, while also expanding into other areas such as energy production, Bitcoin mining, and communications. The educational projects Tether is undertaking are not only related to cryptocurrency but also involve other fields. Paolo stated that they firmly believe that the informatization of education is a key point for future human development, and Tether is investing in this area.

Paolo mentioned that Tether is undertaking educational projects that are not only related to cryptocurrency. They believe that the informatization of education is a key point for future human development. They see the importance of digital technology, online education platforms, and other educational technologies in future education, and have decided to invest in this area.

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