"Money is the best social network."

Author: MD

Produced by: Bright Company

During the global Bitcoin conference at the end of May, the CEO of Tether, the world's largest stablecoin issuer, Paolo Ardoino, was interviewed by CNBC.

In his speech at the Bitcoin conference, Paolo Ardoino stated that USDT has approximately 420 million users in emerging markets and developing countries, accounting for 62% of decentralized trading volume. "More importantly, about 35% of USDT users treat it as a savings account—because they live in countries like Turkey, Argentina, and Vietnam, where local currencies are severely devalued, and they can only choose to save in dollars, with USDT being their most realistic option."

According to Coingecko data on June 18, the overall market capitalization of USDT is approximately $155 billion, with a trading volume of about $27.7 billion in the past 24 hours, making it the largest stablecoin issuer globally; the recently listed “first stock of stablecoins” Circle (CRCL.US) has an overall market capitalization 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" (the "Guidance and Establishment of a National Innovation Act for Stablecoins in the U.S.," which was passed by the U.S. Senate on June 17 and is awaiting consideration by the House of Representatives), Tether's compliance level is lower than that of Circle, which is one reason why Circle went public before Tether. Paolo Ardoino also responded to questions about "offshore structures" and audits in the interview, stating that they have had good communication with the Big Four accounting firms, but he also mentioned, "It will be a long journey."

It is worth mentioning that Paolo Ardoino specifically shared the logic behind Tether's investments in agriculture, dairy, and technology companies such as video platforms and brain-computer interfaces.

According to Tether's website, Tether announced the acquisition of the Latin American agricultural company Adecoagro on April 30 this year, whose main business includes the production of sugar, ethanol, dairy products, and crops in Argentina, Brazil, and Uruguay. The company owns 210,400 hectares of farmland and several industrial facilities in these countries.

In this regard, Paolo Ardoino stated in the interview, "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 starting to consider using stablecoins to complete transactions."

Tether's latest announced investment is its acquisition of a 31.9% stake in the Canadian gold royalty company Elemental Altus Royalties on June 12. Tether stated that this investment is part of "integrating long-term stable assets such as gold and Bitcoin into its ecosystem," serving both as a hedge and as part of its commitment to building resilient digital economic infrastructure.

The following is the interview text translated by "Bright Company" (with edits):

Host: Tether is one of the companies with the highest profit 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 the investment in a dairy company in Brazil. So please talk about your investments in artificial intelligence and neuroscience, and why you are optimistic about dairy and milk in the long term.

Paolo: First, thank you for the 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 have to invest wisely, which is why I want to know what you are doing.

Paolo: Over the past two and a half years, we have generated $20 million in profit. You have to think and create very precise investment plans. We receive nearly hundreds of investment projects every day, so we must be selective. Part of our investments—by the way, these investments are outside of the stablecoin reserves, to clarify—includes long-term safe investments, such as land and agriculture. Tether is known for creating and owning the largest stablecoin in the world, and the USDT stablecoin is a tool that brings stability to people, communities, and countries. We bring stability to countries where local currencies are extremely weak, such as the Argentine peso or the Turkish lira, so stability is at our core. And for long-term stability for humanity, nothing is more stable and necessary than land and agriculture.

The reason we invested in Adecoagro—this is a publicly traded company and the largest single landowner in Argentina, Uruguay, and Brazil—is that we want our portfolio to touch the "real Bitcoin"—land, because land is scarce, and you cannot create more land. Of course, you could say to create more land on Mars, but in reality, humanity will always need land, good agriculture to survive and develop. That is why we allocate part of our portfolio to land businesses. Additionally, we are 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 starting to consider using stablecoins to complete transactions. This is a very attractive way, because we believe that commodity trading companies will become the biggest drivers of stablecoin adoption in the next five years.

Of course, we also 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 a major shareholder in Northern Data, which may 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 build 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 can be considered a competitor to Neuralink, in fact, Neuralink is more of a competitor to them. We are creating the world's most advanced brain-computer interface that can read 90 words per minute from the human brain. If you think about the speed of words, this is almost close to the normal speaking speed of a person. 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 humans will need a mathematical co-processor in their brains to remain relevant and compete with AI and robots. We have also invested in other companies, such as Rumble, which is a very excellent video platform, very competitive, comparable to YouTube, and is developing 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 in the past few years, for example, PayPal launched its own stablecoin, but its market value is still below $1 billion, so many find it difficult to compete with Tether. USDC is currently in second place, but there is still a gap between you. How do you view the changes in the competitive landscape after policy changes?

Paolo: I love competition. But I believe that competition will mainly focus on competing with our second-largest competitor, Circle, rather than us. The reason is that all companies announcing they want 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, but they are simply *overlooked by banks due to poverty.* To get banks interested, you need to contribute at least $150 a year in fees and commissions to the bank. But if you live in a country with an average daily wage of $1.34, or in Africa, where the monthly salary is only $80, you cannot possibly give the bank $150 a year. So all stablecoins created by traditional financial companies will be offered to their existing customers. And we serve 3 billion people— this 3 billion people are seen as a "niche market" by the banking system. Many competitors say Tether serves a "niche market" of banks, but half of the world's population should not be called a "niche." We built ourselves through "ground promotion." We have built many service kiosks in Africa, and by 2030 we will have 100,000 kiosks in Africa, providing electricity to people in small villages through solar panels. We already have 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 in their crypto wallets using their phones, but many places in the world are still cash economies. So stablecoins are indeed important in terms of providing banking services, transfers, and secure storage, especially in high-inflation economies, but are people really willing to pay with cryptocurrency in physical stores?

Paolo: More and more willing. We now have about 420 million users, with 30 million new wallets added 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. Through word of mouth, our user base is rapidly growing. All competitors focus on institutional clients, while we have established millions of touchpoints that connect with the real world; we started from the streets, not from an ivory tower.

Host: Speaking of this, 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, enabling 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 exploratory directions. At the same time, establishing service kiosks in Africa allows us to directly reach people in villages who receive remittances (for example, from Europe or the United States) and teach them how to store funds using smartphones, and then they will pass on the knowledge to the entire village. We rely on word of mouth and practically validate 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 a report from The Wall Street Journal stating that large Wall Street banks are considering launching a unified digital dollar, such as JP Morgan and Citigroup, but they will compete for Circle's market share since Tether focuses on emerging markets.

Paolo: We work hard on the streets every day, and we have a complete team for education and collaboration with local partners. JP Morgan will never go to a small village in Africa to teach people how to use their stablecoin. That’s our daily routine. JP Morgan and these companies will only sell stablecoins to already wealthy individuals, which is why I believe stablecoins in the U.S. are "the icing on the cake," but not a necessity. In the U.S., you have a dozen payment methods to choose from, and the competition is fierce; the payment network is the best, and the dollar is the best payment rail. But outside the U.S., things are not as good; people are eager to have dollars, but cash dollars are becoming increasingly hard to obtain. So the best way for people to hold dollars is through USDT. But no one is paying attention to this market, only us.

Host: Given that you have brought Tether to its current scale, have you considered leaving the Cayman Islands?

Paolo: In fact, we have already moved from the BVI (British Virgin Islands) to El Salvador, and 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 terrible. They require stablecoin issuers to keep 60% of their reserves in uninsured cash deposits. Look at what happened to our main competitor with $3 billion in uninsured cash deposits at Silicon Valley Bank in 2023; the bank collapsed, and the competitor nearly went under, but then the FDIC saved the bank. So the stablecoin was saved. But you should buy government bonds, not keep uninsured cash. The MiCA license requires you to keep uninsured cash, so we decided not to apply for it because it’s a bad license. El Salvador now has the most comprehensive and secure regulatory system. The U.S. will also catch up quickly and have a good regulatory system. Until then, we can only play the cards we have.

Host: I previously spoke with Bo Hines, who is the head of the Presidential Council of Advisers for Digital Assets, and he mentioned that 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.

……

Do you have any concerns about the Genius Act? Do you support other legislation that is being advanced?

Paolo: I think the Genius Act is reasonable and comprehensive; it is very important to establish appropriate rules for stablecoins because stablecoins are the most powerful application of blockchain technology.

Host: Currently, Tether regularly publishes self-attestation 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 complete audit of their reserves; all stablecoin issuers—including our largest competitors—have only done self-attestation. In the past, the media always picked on us, but this is not just a Tether issue; all major stablecoin companies have not conducted complete audits, only self-attestation. 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 auditing firms could not sit down and talk with stablecoin companies—not just us, but others as well. Now the government’s attitude has changed, and they are starting to embrace cryptocurrencies.

In the past month and a half, we have started very positive dialogues with some of the Big Four, and this will be a long process, but it is very positive now, at least we can start the conversation. We have open discussions with them. I am confident that we will achieve a complete audit. I love transparency; I am the most proactive person in the company regarding transparency. If you look at our self-attestation, it is more detailed than our competitors, disclosing all different categories of investments, how much gold, Bitcoin, and other assets we have, and how much government bonds. Last year, we conducted the largest due diligence on our reserves for over two years, with an American institution spending two years examining every detail. The results of the due diligence will be made public in early 2024, confirming the validity of our reserves. They conducted checks in January and May. I also disclosed all processes and reserves to the New York Attorney General over the past two years as part of a settlement. We are the most scrutinized company globally. I know our company is very transparent and is setting an example for the entire industry, and I am also correcting many misunderstandings about us from the outside.

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