"Tether is beneficial to the United States and is actually promoting the expansion of dollar hegemony."

Translation: Wu Says Blockchain

The content of this article comes from a June 23 interview on the Bankless podcast with Tether's Chief Technology Officer Paolo Ardoino, and some information may be outdated.

In this episode, he elaborated on Tether's global business layout, profitability, attitude towards the GENIUS Act, future compliance strategies, and whether a new stablecoin for the U.S. domestic market will be launched. Additionally, Paolo shared Tether's investment directions in areas such as Bitcoin mining, AI, biotechnology, agriculture, and energy, and responded to various discussions regarding Tether's market capitalization and strategic positioning.

At the time of recording this episode, the U.S. GENIUS Act stablecoin bill had just passed the Senate and could potentially be signed into law by Trump. As the current largest stablecoin project by market capitalization, Tether faces a new policy environment and market competition landscape. Host Ryan Sean Adams and David Hoffman engaged in an in-depth dialogue with Paolo, focusing on Tether's compliance preparations, global distribution strategies for dollar stablecoins, and its positioning adjustments in the U.S. and global markets.

Paolo Ardoino has long served as Tether's technology leader, and in this episode, he addressed several key issues, including Tether's relationship with the U.S. Treasury, its treasury bond holding strategy, and its claimed profit of nearly $14 billion last year.

How Will Tether Respond to the GENIUS Act? Will It Launch a Domestic Stablecoin?

Ryan: Welcome to Bankless, where we explore the forefront of stablecoin finance. I’m Ryan Sean Adams, and with me is David Hoffman. We are dedicated to helping you live with less reliance on banks. Right now, the stablecoin space is playing out like a "Game of Thrones," with Tether as the undisputed stablecoin king. So our guest today, Paolo Ardoino, can be considered the "King of Stablecoins." Although he appears quite low-key, he has ambitious plans for Tether's continued distribution and dominance, which is especially important in a new era—an era that has just seen the GENIUS Act, a stablecoin bill, enter the next phase in Congress. This bill has passed the Senate and is likely to be signed by Trump.

My biggest question for this episode is: assuming the GENIUS Act is officially passed, how will Paolo handle USDT and Tether? Will he choose the compliance route, or will he launch a new domestic stablecoin, splitting the business in two? The answer sounds like "both," but it is also very detailed and complex. You’ll have to listen to find out all the details. He also mentioned a number that nearly made us fall off our chairs: Tether made nearly $14 billion in profit last year.

David: We welcome back Paolo Ardoino, a core leader at Tether, which is a stablecoin project with a market capitalization of $150 billion and a pioneer in this industry. Our last conversation took place before the introduction of the GENIUS Act, when there were no legislative updates from Capitol Hill. Now that this significant bill has passed the Senate and is preparing to return to the House for further advancement, we have many topics to update. Paolo, welcome back!

First Reaction to the GENIUS Act and Tether's Compliance Preparations

David: I’d like to hear your first reaction to the GENIUS Act passing the Senate. Although this bill still needs to return to the House for further voting, there is a generally optimistic attitude. Trump even tweeted, "I want to sign this bill, House, get it done quickly." What was your first reaction when you heard this news?

Paolo: As you know, Tether pioneered the stablecoin industry in 2014, and we are honored to see the world's most powerful country and government taking seriously the technology we created 11 years ago and recognizing it through legislation. This is very exciting. I believe the GENIUS Act is an important step in the right direction, as it builds a compliance framework for both domestic stablecoins and foreign stablecoins like USDT. Of course, as you mentioned, it still needs to pass the House, but the current atmosphere looks very positive. This bill sets a high bar, especially in terms of anti-money laundering and compliance, and I greatly appreciate this standardized approach.

A few months ago, I announced that we are promoting a localized stablecoin project in the U.S. The passage of the GENIUS Act provides a clear roadmap and requirements for such projects, and we believe Tether USDT itself is already in a good position to meet these requirements through a "comparable system."

There was also important news yesterday that Tether is collaborating with the U.S. Department of Justice. Over the past year, we have continuously utilized our self-developed monitoring technology to identify and track suspicious activities on the blockchain. I believe we have built the strongest stablecoin monitoring system in the entire blockchain ecosystem.

These examples showcase what Tether is doing. We collaborate with over 250 law enforcement agencies across more than 55 countries. This is unprecedented among financial institutions. We are willing to and continue to push for higher transparency and standards. The requirements proposed in the GENIUS Act are exactly what we have been practicing.

From a financial perspective, this bill also sets high standards. No one wants to see another disaster like Terra Luna. Tether holds over $125 billion in U.S. Treasury bonds, and this number is still growing. Our monetary base is continuously expanding, indicating that we are moving in the right direction. Strong asset-liability requirements are essential.

Currently, Tether's total group equity is approximately $176 billion, while the market capitalization of the USDT stablecoin is $155 billion. In addition to the 100% reserves for USDT, we also maintain about $6 billion in excess reserves. Compared to traditional banks, which typically only keep 10% of liquid assets and operate under a 90% fractional reserve system, Tether maintains over 105% in full reserves. Additionally, our group has an extra $15 billion in assets. This structure is extremely rare in the financial system.

So overall, we are very excited about this bill. Of course, the final version still needs to be released before we can further advance our stablecoin issuance plans in the U.S. But I want to applaud Senator Cynthia Lummis and other lawmakers who have pushed for this legislation.

After the Passage of the GENIUS Act, Tether's Strategic Planning and Expectations for Industry Impact

David: Assuming the GENIUS Act passes in its current form, what new doors will it open for Tether? What will happen next? What strategic arrangements do you have after the bill passes? Additionally, is there anything in the GENIUS Act that you feel is missing? If it could be amended, what clause would you most like to add?

Paolo: I believe the GENIUS Act will provide the much-needed clarity for the entire industry, allowing everyone to operate more safely. For the past four years, our entire industry has been in a hostile environment, not just Tether. That period was referred to as "Operation Choke Point 2.0," where the OCC and the executive branch were suppressing the crypto industry. Crypto banking was nearly impossible. You may recall that in 2023, Silicon Valley Bank and Silvergate Bank faced issues that nearly eliminated our main competitors. All of this is a direct consequence of Choke Point 2.0.

Now, the new government is establishing a new regulatory framework, showing federal government and regulatory support for crypto banking. This will greatly enhance the safety of the entire industry, and we are very excited about it.

Moreover, the GENIUS Act also provides opportunities for more new players. For example, we now see JP Morgan, Amazon, Walmart, and others expressing interest in issuing their own stablecoins. Every major company wants to issue its own stablecoin, and I think that’s great; the more players, the better. As I said on X, "Welcome to the second player." Interestingly, the attention of these new competitors is mainly focused on the U.S. market. I would say that the opportunities in this market are actually quite fleeting.

Ryan: I do feel that Tether has been doing exceptionally well outside the U.S., especially in expanding stablecoin users and use cases, and these metrics do reflect your efforts.

Is USDT Seeking Compliance? Why Is There a Need for Another Domestic Stablecoin?

Ryan: Paolo, I want to delve deeper into your specific plans after the passage of the GENIUS Act. Tether now seems to have multiple paths to take. Let’s assume this bill really passes; I was looking at Polymarket this morning, and the probability there has already reached 80%, the highest so far.

I recall our last conversation was in February 2024, when the regulatory environment was completely different from now, especially regarding the relationship between the U.S. and the crypto industry, as well as stablecoins. At that time, it was still the peak of the "Choke Point" operation.

We just spoke with Senator Bill Hagerty, one of the co-authors of the GENIUS Act, who specifically mentioned Tether. He said that if offshore issuers like Tether want to enter the U.S. market, this bill allows the Treasury to conduct "comparable system" tests. If the regulatory rules of their home country match those of the U.S., they can continue to operate. Otherwise, they would need to establish a U.S. subsidiary to meet the same reserve and disclosure standards. He also stated that Tether could start the compliance process as early as tomorrow.

Can you elaborate on Tether's plans? Currently, USDT does not meet U.S. domestic regulatory standards, but there seems to be a path to compliance. Achieving this path may require stricter audits, optimizing reserve structures, enhancing localization of operations, or obtaining an OCC license. At the same time, we know you are promoting a new domestic stablecoin project, which will be a completely independent asset from USDT and focus on the U.S. market. Are you concerned that this might split liquidity? Can you discuss your considerations in more detail?

Paolo: Yes, the market is very focused on the $13.7 billion profit we made last year. This year, I believe we can do even better. Our current market capitalization is $155 billion, and the Federal Reserve has not significantly cut interest rates as many predicted; we said this long ago, and it has indeed happened.

Why do people think we lack the ability to meet regulatory requirements? I'm not saying you think that, but I've seen many similar comments on X. They believe we will abandon the U.S. market and no longer support the best businesses globally. But why is that the case? We have sufficient profitability; in fact, apart from a few countries, we are now one of the largest institutions purchasing U.S. Treasury bonds. Last year, we were the fifth-largest buyer of U.S. Treasury bonds.

Ryan: Many people may not know that Tether is the fifth-largest buyer of U.S. Treasury bonds, which ranks alongside those at the national level.

Paolo: Yes, in terms of overall holdings, we are equivalent to the 18th largest "national-level" holder of Treasury bonds in the world, even though we are not a nation. This is the power of stablecoins. I believe Treasury Secretary Janet Yellen fully understands this, and the President does too. USDT is an important boost to the U.S. economy.

As Senator Hagerty mentioned, there is indeed a path for a "comparable system" or mutual recognition system. This process may take some time, as countries need to establish corresponding regulatory mechanisms. But I believe the greatest value of the GENIUS Act is that it will serve as a template for other countries around the world to follow.

The United States is the most influential country in the world, so once it passes the GENIUS Act, other countries will follow suit. Currently, apart from the UAE, the regulatory systems in Europe are quite poor—such as requiring 60% of reserves to be held in uninsured bank cash accounts. You remember what happened to our competitors when Silicon Valley Bank faced issues, right? Europe has such a bad system. Meanwhile, the UAE is already doing something similar to the GENIUS Act, and Singapore is also testing the waters. So I believe that once the U.S. legislates, other countries will quickly follow suit, paving a clear path for the global compliance of USDT.

The Division of Roles Between Two Stablecoins and Profitability Challenges in the U.S. Market

Ryan: Regarding USDT, it sounds like your main plan is to make USDT compliant with the GENIUS Act. If that's the case, why issue another stablecoin domestically in the U.S.? Why have two? Is this for redundancy, or is it a backup plan?

Paolo: That's a great question. In fact, the two are aimed at completely different use cases. My view may be controversial, but I believe the current business model for stablecoins does not work in the U.S. Of course, everyone is now focused on Circle's IPO, and many projects are preparing to operate in the U.S., but to be honest, making money with stablecoins in the U.S. is nearly impossible; it will evolve into a "price war to the end."

Just look at the example of crypto exchanges. For instance, Bitfinex made 20 basis points per transaction back in 2012. But now, if you look, market makers' fees are only one basis point, a significant drop compared to ten years ago. This is the result of "over-efficiency." The U.S. is one of the most efficient markets for financial infrastructure globally, having reached a 90% efficiency level. Introducing stablecoins in the U.S. can at most increase efficiency from 90% to 95%, which is not very attractive to users; the "premium" they are willing to pay for this is very limited.

However, in countries like Nigeria, the efficiency of the financial system may only be 20%. If you introduce a stablecoin that can increase efficiency to 50%, that’s a 30% increase. So in these countries, users are happy to hold USDT, even if it only yields a 4% annual return, as it is better than the daily depreciation of their national currency.

Therefore, I believe we need to clearly distinguish between these two products and their respective use cases. For the U.S., future stablecoins will resemble "Tokenized Money Market Funds," like JP Morgan's JPMD product, where these stablecoins will ultimately return all profits to users.

Thus, the domestic stablecoin we plan to issue in the U.S. must compete on different dimensions, such as programmability and additional services, and must not compete using the original business model of USDT. USDT is designed for emerging markets globally, while the domestic stablecoin is meant to serve the U.S.; the two should not be conflated.

Where is Tether's Moat in the Face of Competition from Banks and Tech Giants?

Ryan: Got it. So you are indeed considering launching two products because they serve different use cases. But at the same time, you do plan to have USDT comply with the GENIUS Act, correct?

Paolo: Yes, that is indeed our goal.

David: There is now increasing discussion about domestic stablecoin issuers in the U.S. There are many rumors, such as Amazon, Walmart, and even Meta and Twitter potentially issuing their own stablecoins. We also know that JP Morgan, Citibank, and Wells Fargo are exploring similar stablecoin alliances. Personally, I feel this is a bit like a "psychological placebo," but that's just my opinion. In the future, there will be many competitors in the U.S. If these large banks can issue tokenized deposits anchored to the Federal Reserve's balance sheet, what moat will Tether have five years from now?

Paolo: Tether still has very strong distribution partners and its own distribution network. The key is that banks typically only sell their stablecoins to their existing customers. I don't see any bank employees willing to go out on the street and educate ordinary people on how to use stablecoins. And that is precisely our strategy.

We never rush to partner with the largest banks when entering a country, which is completely different from our competitors. We educate on the streets, promote in communities, hold educational seminars, and provide knowledge on-site. We seek local partners who align with our "bottom-up" philosophy. That is how we promote stablecoins.

Although the financial infrastructure in the U.S. is very well-developed, I recently saw a report stating that many people find it very difficult to open bank accounts. Therefore, there will still be a segment of the population in the U.S. that needs our "direct-to-user" products, rather than those traditional institutions that sit in their ivory towers and think the world is still the same as it was 20 years ago.

How Do You View Circle's Valuation After Its IPO? Will Tether Consider an IPO?

David: I want to talk about Circle's stock price after its IPO. It was issued at $31 and has now risen to $200. I saw someone on Twitter do a simple valuation calculation, and if we use a similar price-to-earnings ratio to estimate Tether's value, it would be around $3 trillion. What do you think of Circle's stock performance after its IPO? I find it quite astonishing.

Paolo: First of all, we do not plan to go public. Companies typically choose to go public for two reasons: one is to raise capital, but our profitability is very strong, and we don't need that; the other is to allow shareholders to exit. Over the past two years, we have invested over $5 billion in the U.S. with our profits, which is rarely mentioned but is very important. We are also giving back to the country that created the powerful dollar.

Going public is for cheaper capital acquisition or to allow shareholders to exit. We don't need these; we are very happy with what we are doing now, feeling like this company has just begun, with many things to do and many areas to expand into. We have many new ideas, pushing disruptive innovation around the concept of USD— for the masses, not for a few large companies.

So when I see that multiple for Circle, I also think that’s a nice valuation multiple. Of course, valuation is ultimately a market matter, and we will wait and see. But for us, this situation is already very good.

David: Going back to Tether's current position alongside nations in terms of U.S. Treasury holdings, combined with this potential valuation of trillions, does this scale and influence put pressure on you? If I were you, managing so many Treasury bonds and operating like a "nation," I might feel overwhelmed.

Paolo: This indeed involves many misunderstandings. Some people are still living in the 2014 narrative, thinking that Tether is something that needs to be hidden. But we actually store our assets in reputable custodial institutions, and everything is open and transparent.

Ryan: I think many investors are also trying to figure out how much the stablecoin sector is worth. You can see Wall Street is already trying to estimate Circle's value, and stablecoins are starting to enter the public investment spotlight, while Tether is finally being put in the limelight. For example, Treasury Secretary Janet Yellen recently recognized that Tether is an important buyer of U.S. Treasury bonds.

Ryan: Let's compare: Circle's market cap is about $45 billion, with an annual net profit of around $150 million. You just mentioned that Tether made $13 billion in profit last year, and this year it will be even higher. David's mention of a $3 trillion valuation does sound exaggerated, but based on your cash flow, making it into the top five is not far-fetched—just behind companies like NVIDIA, Apple, and Microsoft. Plus, your Treasury bond reserves are also very strong. This comparison is becoming meaningful now because you have a real comparable entity, and that company is now publicly traded. So how much do you think Tether is worth today?

Paolo: To me, it’s worth a lot.

Ryan: Haha, that’s definitely the right way to put it.

Paolo: Exactly, for me personally, its value is immense because it feels like my child. But to be honest, I don't know if a 200 times price-to-earnings ratio like Circle can be maintained in the long term. If they can, that would be great, and it would also be beneficial for us.

We have come a long way, experiencing highs and lows, but many people have steadfastly continued, persevering through difficulties to build this company. So I want to say this is an achievement for everyone, and it deserves to be celebrated.

The Second Half of the Stablecoin War: Distribution Strategy for the Next Phase

Ryan: Let's talk about the second half of the stablecoin competition. It can be said that Tether has won "Phase One," which was primarily the era of crypto-native users. The passage of the GENIUS Act means we are entering "Phase Two." David mentioned that many U.S. companies, including banks, are planning to enter the stablecoin space. These will become your new competitors. Welcome to this new battlefield. Now, banks are starting to participate, and tech companies are too, like Meta.

I saw an interesting article by Arthur Hayes about stablecoins. He pointed out that the core of stablecoin competition is actually the "distribution network." Tether was the first player to enter this field and established crypto-native distribution capabilities. Tron is an excellent distribution channel, with your circulation on Tron reaching 80 billion USDT, and the use cases and payment scale are quite considerable.

The next question is, in the next phase, you will be facing big tech companies like Meta. Meta has over 3 billion global users. This will be a whole new chapter. In this situation, how will Tether continue to win the distribution battle?

Paolo: This is a very interesting topic. We still need to observe the final language of the GENIUS Act, but it seems that companies like Meta may find it difficult to launch stablecoins on their own in the future.

I believe that big tech companies will ultimately need to collaborate with existing stablecoin issuers or small banks, supporting stablecoins issued by others through agency issuance or revenue sharing. This model will create a very interesting competitive landscape. I still think that companies like Meta have limited space to issue stablecoins on their own.

In terms of distribution, Tether has already made a lot of arrangements. More than 100 companies have accepted our investments through Tether Investments, rather than using our reserves for investment. These investments have formed our vast distribution network.

For example, the domestic stablecoin product Rumble will launch Rumble Wallet, which will start with 70 million users. This is a very good starting platform, even more active users than the largest crypto exchange in the U.S., which is clearly a significant advantage.

We also have the USDT Dot Network website, which publishes data on our user behavior, such as 37% of users using USDT for savings. Our construction of the distribution network is very in-depth and is a "down-to-earth" model; we can even penetrate into the smallest villages in the Philippines.

We have invested in cross-border remittance companies, established service points in Central and South America, and built digital currency infrastructure in Africa. In Africa, we also launched a pilot project to build 500 stablecoin exchange kiosks.

Ryan: I'm shocked to hear you share this data; all this information can be found on the USDT Dot Network, right? An estimated user count of 4.4 million—I feel like the entire U.S. is completely unaware of the scale of this use case. People keep saying that crypto lacks a "killer app," but your data shows that 440 million people are actually using the dollar, which is the real killer app.

The Explosive Growth of Tether Users: How the Pandemic Accelerated Stablecoin Adoption in Developing Countries?

Ryan: How did Tether achieve its distribution in the first phase? It can't just be a story about emerging markets, right? Can you explain to someone seeing these numbers for the first time how they came about?

Paolo: This is actually a very interesting question. If you look at our market cap growth chart, you will see what happened in 2020. Do you remember what happened that year?

Ryan: We experienced a global pandemic; are you talking about that?

Paolo: That's right. And at that time, we didn't have a marketing team; we only really established a marketing department in 2022. If you look at the growth between 2020 and 2022, the changes we later understood were significant. We did a lot of self-reflection and asked ourselves many questions.

Think about developing countries; they have a few common characteristics. First, they are generally poorer; second, inflation rates are generally higher than in developed countries. But more importantly, they have two key features: one is a high smartphone penetration rate and a relatively high level of digitization; the other is a noticeably young population with a large number of young people.

From 2017 to 2020, this generation of young people was the first to be exposed to and understand cryptocurrencies. Then, when the pandemic broke out in 2020, a significant change occurred. The parents of those "kids" who understood crypto began to take to the streets due to unemployment and economic collapse caused by the pandemic. Compared to the U.S. or Europe, developing countries faced greater economic shocks, higher unemployment, and more severe inflation.

Ryan: So how did they use USDT? Was it through traditional crypto exchange apps, or wallets like MetaMask that connect to Ethereum and Tron?

Paolo: Mainly through local exchanges and various wallets—there are truly countless types. We never say, "You must use this wallet" or "Recommend that wallet." That’s the point—when people truly need it, they will naturally find solutions. This is also the problem in Western countries; people's needs haven't reached that level of urgency.

When your family is in danger, and you work hard all year only to be poorer at the end of the year than at the beginning, just because your national currency is depreciating too quickly, you will go to great lengths to protect your family. This is the reality we see and the true reason behind the explosive growth of Tether users.

Is the Growth of USDT Still Strongly Correlated with the Crypto Market?

Ryan: How much do you think Tether's market cap growth is related to the total market cap of the entire crypto market? It seems there is indeed some correlation, such as a significant increase before 2022, followed by a decline, although it didn't drop back down, and then it started to grow again. Do you think there is a causal relationship here?

Paolo: To be honest, we are actually compiling data on this, but from what we currently observe, the portion of Tether's market cap that comes from the crypto market is conservatively estimated to be less than 40%. In other words, over 60% of the growth comes from the real demand for dollars at the grassroots level in emerging markets.

I believe the next wave of growth for USDT will come from the commodity trading sector. Almost all major commodity traders are contacting Tether because, for them, USDT is a "great invention, second only to sliced bread." They need to conduct international settlements, but the traditional banking system is extremely inefficient, leading to very poor capital efficiency for these traders. USDT can make their settlement processes nearly infinitely efficient.

You should know that the main export locations for commodities are often in emerging markets.

For example, look at Bolivia. I tweeted about Bolivia last week. In small shops in Santa Cruz and other cities, prices are directly marked in USDT. We have never set up an office in Bolivia, nor have we sent anyone there; all of this has formed organically through user demand.

Tether Ventures' Investment Strategy and Global Agriculture and Energy Layout

David: I want to shift the topic to Tether Ventures. You have made a lot of arrangements in this area, and Tether's investment portfolio includes many interesting projects. Some are quite intuitive, like Plasma and Stably, which are L1 blockchain projects built specifically for Tether.

But your investments also cover some more "discrete" areas, such as acquiring mobile communication networks, fiat deposit and withdrawal infrastructure companies, and energy startups. There are even some media tech companies that help creators with content production. I heard you also own an Italian football club? These investment portfolios are quite interesting. Can you talk about the strategy behind Tether Ventures?

Paolo: Yes, our portfolio is indeed vast, so we need to develop different strategies for different fields.

We have recently started acquiring land and agricultural companies. For example, a company called Adecoagro, which is publicly listed in the U.S. and is one of the largest landowners in South America, with land across Brazil, Argentina, and Uruguay. Their main business includes agricultural production, such as rice and beef.

We value these types of assets primarily because land itself is a scarce and safe asset with long-term appreciation potential. Investing in land and agriculture, which are resources that humanity will always need, is a very robust strategy as part of asset allocation.

More importantly, we believe agriculture is also part of commodity trading, which can be combined with the use of stablecoins in commodity trading that we mentioned earlier. USDT and other stablecoins can help agricultural enterprises improve capital efficiency, whether for financing or commodity payments, making them faster, more transparent, and decentralized. Therefore, the combination of agriculture and stablecoins will be a very promising direction.

Additionally, there is an interesting idea that we are losing our ability to "think independently." Many people can't even do simple mental arithmetic anymore because we have calculators. The development of AI may make our dependence on "intelligence" even more severe. Just like in the crypto industry, there is a saying, "Not your keys, not your coins," I believe that in the future, there may be a similar concept: "Not your AI, not your intelligence."

If you hand over all your data to a company that controls your intelligence, then you are not actually becoming smarter; you are becoming more dependent and even more dull. The companies that control your data and "intelligence" will only become stronger. This trend is worth our attention.

Decentralized AI Platforms and the Vision of Data Sovereignty: "Not your AI, not your intelligence"

Paolo: Based on our current balance sheet strength and our unique position as a company with both technological and capital capabilities, we hope to create a technology platform that brings AI closer to the public. This SII (Decentralized Intelligent Interface) platform can run on all devices, whether it's a $30 cheap smartphone, a high-end flagship phone, a laptop, or a server; it can automatically adapt to the models, weights, and other parameters used.

We have also invested in some biotech companies, such as Blackark Neurotech, which has no relation to Blackrock, although we might consider a name change. We are particularly focused on brain-computer interface technology, which I believe is the ultimate defense for humanity against being "ruled by robots." In the future, if humanity wants to become smarter, it will need some kind of "mathematical coprocessor" implanted in the brain, but it cannot upload all your thoughts to OpenAI or other large companies.

This is also the reason I proposed the idea of "Not your AI, not your intelligence." I am very optimistic about the future of combining local computing intelligence with brain-computer interfaces. I am a heavy sci-fi fan.

You just mentioned our investment in a football club. Yes, we did invest in Juventus in Italy. Juventus won their first match in the World Club Championship 5-2 yesterday, which is a good start. Giancarlo and I are both football fans; this investment is actually quite small relative to our entire portfolio, but it has indeed brought a lot of joy.

David: Was this investment just for fun?

Paolo: Yes, partly for fun. But think about it; this could also become a huge distribution channel. Juventus has fans all over the world. We can bring more fans to Juventus through our network while also leveraging Juventus's influence to expand our user network. This synergy has a lot of potential.

Core Investment Strategy: Prioritize Distribution Potential, Drive AI Wallet SDK (WDKS)

David: In the long term, when you evaluate a potential investment project, is distribution your primary consideration? Do all your investments prioritize distribution capability?

Paolo: Absolutely correct. Even in the process of building our AI platform, distribution remains the top priority. I believe that in the next 15 years, we will see a trillion AI agents, and each AI agent should have a non-custodial wallet. I can hardly imagine my AI agent opening an account with the Federal Reserve or JPMorgan.

Therefore, we are building an SDK called WDKS (Wallet Development Kit for Smart agents), which is a completely open-source wallet development toolkit that anyone can use to build non-custodial wallets. We will not hold any private keys, and it supports various blockchains, allowing you to integrate wallets using any AI model.

My vision is this: I have a smart refrigerator that displays a QR code linked to a non-custodial wallet. I put $50 into the refrigerator, and it helps me purchase ingredients. I don’t want the refrigerator’s money stored in PayPal; that’s not the user experience I want.

Moreover, imagine that billions of devices will need such functionality in the future. I even envision that within the next 20 years, every light bulb should have a micro AI that can adjust the optimal brightness and energy consumption based on environmental conditions. Maybe not in 20 years, but perhaps in 30 or 40 years; that’s the direction we are heading.

This is why we want to build localized AI. I don’t think every light bulb should connect to ChatGPT; if that were the case, the system would definitely crash, and the latency would be very high. Local AI will become very important, and having local AI with its own wallet will also become crucial.

No Plans to Launch "Tether Chain," but Support for Multi-Chain High-Speed Payment Infrastructure

David: Some of the investment projects that Tether has recently attracted attention for in the crypto community include Plasma, Stably, and a batch of Layer 1 blockchains built specifically for Tether. Particularly, Tron’s transaction fees have recently risen to $4–5, which is clearly not feasible as a payment chain. So, projects like Plasma and a few others aim to create a payment blockchain specifically for Tether. Tether has invested in these projects. Are you planning to turn one of them into a "Tether Chain"? Or how do you view these high-throughput blockchains designed for Tether?

Paolo: Tether will not launch a so-called "Tether Chain," and I don’t think there will be such a chain in the future. However, there are indeed many great teams and projects building excellent ecosystems, and we are willing to invest in and support them.

You mentioned the rising fees on some chains; in fact, fees are volatile, sometimes high and sometimes low. I envision that in the future, there should be a user experience that we can integrate into some wallets. Tether may launch its own wallet by the end of this year—I’ve never mentioned this plan before.

Ryan: Will the wallet be launched on a specific network, or will it support multiple chains?

Paolo: It will support all networks. We hope this wallet will be equipped with WDKS (Wallet Development Kit for Smart agents), allowing anyone to develop similar wallets based on this framework. We are not looking to profit from this wallet. In fact, I don’t even want to launch a wallet, but I want to ensure that there is a truly excellent wallet product in the market.

David: Speaking of Plasma, this chain has attracted a lot of attention on crypto Twitter; it is actually a Bitcoin sidechain. Before Tether exploded on Ethereum, it was initially deployed on the Omni network, which is a sidechain of Bitcoin. That can almost be said to be the earliest chain built for Tether, at a time when the entire industry had not yet truly understood blockchain technology. So now going back to a Bitcoin sidechain feels a bit like "reincarnation."

Tether's Relationship with Bitcoin: Believers in Holdings, Origins of Stablecoin Development

David: Tether initially issued stablecoins on Ethereum, later expanded to multiple blockchain networks, and is now incubating some projects similar to a "Tether Chain," including a Bitcoin sidechain. How do you view the relationship between Tether and Bitcoin? Do you think Bitcoin has its uniqueness? Is it just another chain? You clearly hold a large amount of Bitcoin and are bullish on it—what comes to mind when you think about Bitcoin?

Paolo: I am very passionate about Bitcoin; our entire team loves Bitcoin. It is Bitcoin that brought us into this industry. The birth of Bitcoin carries a certain poetry.

Many people say that producing a block every ten minutes is too slow. Yes, it is indeed slow, which is why you see the emergence of various Layer 2 solutions, like the Lightning Network, or new architectures like Plasma. My point is that you shouldn’t use the Bitcoin mainnet for everyday payments directly.

But Bitcoin's "true removability" is very important. With a block every ten minutes and a block size of about 1 to 4MB, even if you are in a village in Africa, as long as you have a simple antenna device, you can download a few megabytes of data within ten minutes. This means Bitcoin is currently the only blockchain that can achieve truly decentralized access even in the most remote areas. If blocks were more frequent and larger, it would be difficult to keep up with blockchain synchronization in developing countries.

Ryan: This also aligns with your treasury investment strategy. Tether holds about 100,000 Bitcoins in its treasury. Do you think you will consider allocating other crypto assets in the future?

Paolo: The question is… (to be continued)

Bitcoin Mining Layout: Tether Aims to Become the World's Largest Miner

Ryan: What about Bitcoin mining? I remember Tether has also invested in this area; can you tell us about it?

Paolo: Yes, Tether expects to become the world's largest Bitcoin miner by the end of this year.

Ryan: Wait, are you saying Tether will become the world's largest Bitcoin miner?

Paolo: That's right. There is a viewpoint about Bitcoin mining—if you have a large sum of money to invest, you have to choose between directly buying Bitcoin and investing in mining.

David: So you will be the most consistent miner in the Bitcoin network. Because some people, like myself, worry that when Bitcoin's block rewards gradually approach zero, its security may decline. But what you mean now is that if you hold 100,000 Bitcoins and are also the largest miner, then you have enough motivation to maintain the normal operation of the Bitcoin network.

Paolo: Yes, that is one of our considerations. We are working to make mining deployment more decentralized; currently, we have mining farms in South America and several countries, including the United States. We believe that at this critical moment, the role of the U.S. is particularly important, and we are willing to give back and contribute. At the same time, Bitcoin also needs such steadfast support.

I believe the future trend is that as block rewards approach zero, on-chain transaction fees will rise significantly. This will be a natural evolutionary path for the continued operation of the Bitcoin network.

The Current Status, Logic, and Physical Redemption Mechanism of Gold Stablecoins

Ryan: Let’s talk about another very traditional asset, not digital gold, but real gold. This is actually a long-standing application scenario that has seen increasing demand recently. Can you update us on the relevant data? I see that there are currently about $2 billion in gold tokens on-chain, of which Tether accounts for about 50%. While the rise in gold prices is one factor, it seems that market demand is indeed increasing.

Paolo: I believe that gold tokenization is a complex but promising field. Last year, we saw tremendous interest in this product. Unlike other gold stablecoins, the gold stablecoin we launched is backed by physical gold held in a vault controlled by Tether itself. Therefore, one reason users choose gold stablecoins is to hedge against various risks, such as potential financial market collapses. At the same time, you cannot be sure whether the so-called "paper gold" is truly backed by physical assets. So, the logic of "not your gold, not your gold" makes a lot of sense. Currently, Tether holds about 80 tons of gold stablecoins and its own gold combined.

Ryan: The gold in your vault is part of your treasury reserves. I saw reports saying it was about 50 tons, and now you’re saying it’s 80 tons?

Paolo: Yes, it’s now about 80 tons.

Ryan: For those who are not familiar with Tether's gold token product, what exactly is it? It is, of course, a tokenized product representing gold, meaning there is actual gold somewhere backing it. And you control the vault and the gold, right? What is the basic mechanism of this product?

Paolo: Most large gold bars are about 400 ounces, which is approximately 12.5 kilograms.

Ryan: Really? So you can exchange the tokens for real gold bars, physical redemption?

Paolo: Yes, you certainly need to hold the complete number of tokens representing a full gold bar to do so. We won’t sell you half a gold bar.

David: You don’t do fractional gold redemption?

Ryan: David is right; you either buy a whole bar or just hold the tokenized version on-chain. However, tokenization itself can be very fractional, right?

Paolo: Yes, absolutely.

Ryan: This product is very cool.

David: Do you have plans to tokenize other assets?

Ryan: After gold, will you consider real estate?

Paolo: The issue is, for example, with oil or silver. If you consider silver, its volume is 100 times that of gold, and because its unit value is 100 times lower, the storage costs will also be much higher.

The U.S. GENIUS Act May Become a Global Regulatory Template, Europe’s MiCA Faces Challenges

Ryan: The total amount of gold is actually not large; all the gold in the world combined is only about the size of an Olympic-standard swimming pool. If you really bought it all, then Tether would control all the gold in the world. This episode has been really great, Paolo. I think everyone has a clearer understanding of Tether's scale, ambitions, and the breadth of your involvement.

Ryan: I want to return to a topic you just mentioned, which is the "template effect" of the GENIUS Act. You mentioned that the GENIUS Act could become a blueprint for legislation in other countries. I'm not very clear on the current progress of cryptocurrency legislation in Europe, especially regarding stablecoins like MiCA (Markets in Crypto-Assets Regulation). How do you think the philosophy behind the GENIUS Act will resonate in Europe? How will the global regulatory landscape evolve moving forward?

Paolo: I hope so. As a European, I can also speak some truths. The problem with MiCA is that it requires stablecoin issuers to hold at least 60% of their assets in uninsured bank deposits. In the U.S., the deposit insurance limit is $250,000, while in Europe, it is €100,000.

Paolo: Think about the Silicon Valley Bank collapse in 2023; our main competitor suffered significant losses because $330 million was held at that bank, and those funds were actually uninsured.

Paolo: So you can imagine how dangerous it is if a stablecoin project keeps 60% of its funds in such uninsured bank accounts. We proposed before the MiCA legislation that 100% of reserve funds should be used to purchase government bonds. The GENIUS Act clearly does better in this regard, as it requires stronger asset security. It stipulates that stablecoin issuers must be able to achieve 100% government bond coverage.

Paolo: So I hope to see the GENIUS Act become a global template. Perhaps it can push Europe to amend existing regulations. If Europe continues to insist on such unsafe reserve requirements, their regulatory system cannot be seen as "comparable" to that of the U.S. Other countries, I believe, will reference the U.S. GENIUS Act, with some possibly setting a 90% government bond ratio and others slightly lower, but the direction will definitely lean towards the U.S.

Why the EU is Unwelcoming to Dollar Stablecoins? The Contradictory Path with Central Bank Digital Currencies

Ryan: What about the situation with the euro? Besides dollar stablecoins, how do you view the development direction of Europe's own euro stablecoin? Do you think the EU will be more inclined to launch a digital currency from the European Central Bank (CBDC)? This seems to differ from the U.S. approach of "letting private enterprises issue stablecoins." Of course, it can sometimes be hard to see the policy direction in Europe, as the EU's decision-making process is indeed quite opaque.

Paolo: I think they want to push for central bank digital currencies (CBDCs) with all their might, but I believe this is not a good direction. First, the EU is fearful of dollar stablecoins; they want to limit the circulation of dollar stablecoins as much as possible because they worry that the widespread use of the dollar will further weaken the euro.

Paolo: You see, if you go to countries outside the U.S. and randomly interview 1,000 people on the street, asking them whether they prefer to use their local currency or the dollar, almost no one will choose their local currency; everyone will say, "I want dollars." And if you ask people in regions outside Europe whether they like the euro, most of them don’t even know what the euro is, let alone choose it. Even within Europe, many people do not like the euro. So you can imagine how low the euro's global appeal is.

Paolo: From this perspective, some of the protectionist measures Europe is currently taking may be understandable. They are trying to protect their monetary system from being eroded by the dollar. But personally, I do not like the idea of central banks issuing digital currencies. Right now, when we use credit and debit cards, banks act as intermediaries, standing between users and the state, providing a buffer and protecting privacy. If all payments are made through a central bank digital euro, then the state can precisely track every transaction; for example, if you spend at a bar in Milan, the central bank can know immediately. This makes me very uneasy.

How Tether Moved from the Margins to the Center of Compliance and Became a Supporter of U.S. Interests

Ryan: Paolo, this interview has been truly fascinating. I’d like to ask you to summarize at the end. In the past, the relationship between Tether and the U.S. government has been quite tumultuous, and the same goes for the crypto industry. Tether has faced a lot of scrutiny and criticism and has gone through much uncertainty.

Paolo: I believe Tether is beneficial to the U.S. First, our business supports the global circulation of the dollar.

We are actually promoting the expansion of dollar hegemony. While China and other BRICS countries are trying to weaken the dollar's dominance, we are promoting the dollar worldwide. In places like Africa and Central and South America, the U.S. presence is not strong, while BRICS countries are actively positioning themselves. But Tether's influence has permeated every corner of these regions, and we are helping the dollar become the preferred and most commonly used currency in these markets.

Additionally, we are also one of the largest buyers of U.S. Treasury bonds and debt. It’s worth noting that China once held $2.3 trillion in U.S. debt, which has now fallen to less than $700 billion; they may even use this as a weapon to pressure the U.S. Therefore, decentralizing the structure of U.S. debt holders is very important, and we are contributing to that.

I believe the passage of the GENIUS Act will enable us to continue this contribution in a more robust manner. We are also making significant reinvestments in the U.S. to support excellent domestic companies. Our U.S. debt is also held in the U.S. rather than in some unknown European bank. All of this reflects the deep binding between Tether and the U.S.

As for the criticisms from the crypto industry, I think that is just "fear, uncertainty, and doubt" (FUD), but data does not lie. From the growth curve, our business has consistently maintained steady growth.

Ryan: You’ve brought the dollar to places that U.S. banks cannot reach. Thank you for your insights today, Paolo; it has been truly remarkable.

Paolo: Thank you for your time and the opportunity. Thank you.

Ryan: A reminder that the above content does not constitute investment advice. Crypto assets carry risks, and you may incur losses. We are heading into the unknown western frontier—this journey is not for everyone, but I’m glad you joined the exploration path of Bankless. Thanks again, everyone.

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