Paolo Ardoino (Tether): "We are the most resilient company in the industry"

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‍Criticized for its lack of transparency, Tether seems stronger than ever with its stablecoin, USDT, worth over $70 billion. The Big Whale spoke with its chief technology officer (who is also CTO of Bitfinex) about this insolent and troubling financial health.

The Big Whale: Tether's crash has been announced 1,000 times, and yet you're still here. What does this inspire you?

Paolo Ardoino: For years we have been attacked, criticized, some hoping that Tether will collapse, but this is not the case. Why not? Because their attacks are unfounded.

We are in contact with the US regulators, a lot of things have been audited. I think we are the most scrutinized and also the most resilient company in the industry. 💪

There was some criticism of your reserve. You recently switched from commercial paper, which are composite corporate bonds (several types of loans bundled together), to U.S. Treasuries, which are supposed to be much stronger. Isn't that a sign that there was a problem?

There were some untruths about it. Many said we had commercial papers without saying they were good quality. We had the ones with the highest ratings.

We then moved into T-bills because there was a demand from our clients to do so and it seemed like the right strategy.

The Silicon Valley Bank fell in 48 hours while its coffers were filled with U.S. Treasury bills...

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Yes, but we're talking about 30-year bonds, that was bullshit! They put all their clients' money into bonds that were absolutely illiquid, and they did it because they wanted the highest possible return (in principle, a long maturity pays more, ed. note), and it paid off in cash. 💥

For the USDT, this is not the case at all. We only have US Treasuries with short maturities. To give you an idea, today we are on maturities of less than one year.

The irony is that we were able to swap our commercial paper for Treasuries without difficulty, while Silicon Valley Bank and the other banks failed.

What is your financial situation?

We've never been better. In the fourth quarter of 2022, we made $720 million in profit. In the first quarter of 2023, which ends in a few days, we'll probably do the same. At least $700 million in profits. 🤑

What do you plan to do with this substantial income?

Most of this money will be reinvested in the company to develop technology and new projects.

At the same time, we will continue to diversify the reserve by investing in assets such as energy infrastructure ⚡️.

Is proof of reserves an effective way to demonstrate the creditworthiness of exchange platforms?

We have a proof ofreservations for Bitfinex. I think it's a good solution, but only if you see it as a first step, because the problem with this system is that it doesn't take into account the debt of the companies, so it's something biased.

To succeed in making a more complete proof of reserves, you have to work with audit firms. Afterwards, even with auditing firms it's not easy, because auditing a platform with so many transactions still requires some acculturation. Can you imagine me explaining to auditors how Monero or Solana work? 😅

While waiting for full audits, how can you reassure your customers?

You can see publicly on the blockchain that Bitfinex controls the second largest bitcoin wallet in the world (198,000 BTC or $5.7 billion, ed.) while we do "only" 10% of the volumes of our competitor Binance (which controls more than 530,000 BTC, or $15 billion ed.)

We don't need to make ourselves look better than we are. Bitfinex has a very strong customer base, that's the most important thing. We focus on them and they trust us because they see the technology and public wallets.

However, coming from a traditional finance background, I understand that some people prefer to hold their funds themselves. Our institutional clients can leave them with a third party like Fireblocks or Copper, and do their trading on Bitfinex.

Tether was not affected by the recent banking turmoil, but your competitor Circle (USDC) was heavily impacted, at least for 48 hours. What are your thoughts on this?

Nobody can be happy about what happened. If Circle is in trouble, it's not good news. Our goal is not to be the only one in the market, because when you are the only one, there is no market...

What is your main difference with Circle?

In terms of transparency and reserves, our certificate is three or four times longer than theirs. Otherwise, Circle's main market has always been the United States, which is probably the least attractive market for us. Trying to sell a stablecoin dollar on Wall Street is like selling a mass to the Pope, it's just a no-brainer!

For us, the objective is not to provide a new tool to banks, but to enable 2 billion people who do not have access to banks to access financial services.

We want our stablecoins (read our report 💡) to be available in other parts of the world where we think there are real needs, like Turkey or Argentina (read our report) where the currency is collapsing.

Circle announced last week that they are setting up a European headquarters. Their objective is clearly to accelerate and become compliant before the arrival of the MiCA regulation. What is your strategy in this regard?

We are obviously following the subject closely. I think it's great that MiCA is putting rules in place and giving Europe the opportunity to protect its market by favoring euro stablecoins over dollar stablecoins.

But you also have to bear in mind that this will potentially have an impact on the whole market, because MiCA is quite restrictive with stablecoins, especially on volumes. The risk is that there will be no stablecoin at all in Europe. 🇪🇺

How to find the right balance?

It's not simple, I admit. The only thing we know for sure is that stablecoins are ultra dominant.

As you know, we already have a euro stablecoin, Euro Tether, and it weighs just over $40 million. In contrast, our dollar stablecoin, USDT, weighs more than 1,000 times as much ($70 billion, ed. note)!

Will regulation allow euro stablecoins to emerge? That is the real question. In any case, no one can guarantee it. In addition to regulation like MiCA, we also need to create incentives to use euro stablecoins.

You are present almost everywhere on the planet. What are the regions of the world where the USDT is the most used?

It is not in Europe or in the United States, but in the regions where the financial system is least developed, i.e. Southeast Asia, Africa and South America.

What do you think of the French crypto ecosystem?

It is quite impressive. You have several very large companies like Ledger which is a great standard bearer for France.

There are also companies like LN Markets in which we have invested (its sister company Bitfinex has invested, ed. note). I think the Italians have the best food and France has the best crypto companies (laughs). 🍝

Do you have a specific plan for your euro stablecoin?

Euro Tether has been launched on several platforms like Huobi or OKX. This strategy shows that we want to develop this product, also because there is demand.

Have you published an audit about the Euro Tether?

We did it with the dollar stablecoin and we're going to do it with the euro stablecoin, but right now it's not easy to convince the big audit firms to do it.

There are still no clear rules on these subjects, so audit firms like KPMG or EY are asked to apply rules that they have to invent at the same time.

They don't want to risk certifying the stablecoin pool that could be affected by regulation.

What do you think about the regulatory pressures on the crypto industry in the US?

I think this is a huge opportunity for Europe to become a home for the crypto universe.

After that I don't buy the story that the US doesn't want crypto anymore. There is still a lot going on there, there are very large projects. Their problem is that without clear regulation, it's the regulator that's cleaning up the mess and that's doing damage. 😬

Which countries do you think are the most welcoming for crypto?

I would say Switzerland and France for Europe, although MiCA will smooth that out.

Singapore is very attractive in Asia, Dubai in the Middle East and clearly El Salvador in South America.

Beyond the Bitcoin ads, what makes you say that about El Salvador?

They are doing a lot of things: There is obviously the legislation on cryptos and especially Bitcoin, but there is also their mining project with the energy of volcanoes, then their ambitions in Tech.

They are very attractive. Bitfinex is working with them locally. El Salvador does not have a national stock exchange, so we will help them with our infrastructure to distribute their digital assets.

Many say that El Salvador's crypto turn is primarily marketing. What do you think about it?

I had this same impression 18 months ago, before they made bitcoin their legal tender. I thought it was mostly buzz, then I met President Nayib Bukele...

I had dinner with him a few months ago, and honestly, I was blown away. I'm Italian, so I know what politicians are like and I know they can tell stories, but here they really do things. 🇸🇻

Isn't there a gap on the subject while the country remains affected by violence and poverty?

Here we are talking about the monetary dimension. Bukele has a choice between the dollar, which is not his currency, and bitcoin, which can allow him to regain sovereignty, so he chose his side, and I think he made the right choice.

He will surely not be the only one to make this choice, you will see. I wouldn't be surprised if this happens even in some European countries.

What do you think about bitcoin?

I think it's clear that Bitcoin has proven itself to be an asset in its own right, both anti-inflation and capable of serving as a financial structure.

In our "Manifesto for Freedom" (published in November 2022) we pledged to promote the development of the Lightning Network, which will make bitcoin a cost-efficient and fast means of everyday payment.

What do you think of central bank digital currencies? Do you think like some that it is the "absolute evil"?

Most central bankers like to say they are working on MNBC projects to give the impression that they are at the forefront of innovation. But keep in mind that they, too, are afraid of such projects.

They are not crazy and they know they would be putting their finger on something potentially out of control. MNBCs are a one-way street. 😓

What does that mean?

When you launch a project like this, you have to keep in mind that it can have an impact on consumers, businesses, banks, in short on society as a whole. With MNBCs, it is possible to set negative or positive interest rates, to control the money supply, quite simply.

Take your cash, no one can take it from you when it's in your pocket. Imagine tomorrow that you have MNBCs. The state will tell you that everything is fine and then if all of a sudden they need money, they can take it from your pocket by putting negative interest rates.

Put in the hand of an authoritarian power, as in China, it could go even further.

How do you see Tether in the years to come?

Today, Tether manages USDT, which is the largest stablecoin on the planet. USDT is great, but it is only a digital asset based on the dollar.

I think our best product today is Tether Gold, which is a stablecoin based on gold. I think that gold is not a competitor to bitcoin because Bitcoin has already won the battle, but it is a great alternative.

We've talked a lot about the problems of the banks in recent weeks. Who are your American banking partners?

We work with Cantor Fitzgerald in particular, but in general we tend not to rely too much on the US banking system.

We have been criticized a lot for this choice, but for us it is not possible to work with such a fragile banking system, and what happened recently with Silicon Valley Bank and other institutions is the best proof of this.

Who else do you work with then?

We have banking partners in the Bahamas, Asia, and other regions, but not all are public.

You are also criticized because the same team runs two very important companies in the ecosystem, the exchange platform Bitfinex and Tether. How do you respond to those who accuse you of mixing genres?

Why should that be a problem? We created these two businesses, why should we give our golden goose to someone else? 🤑

But you can see that there is a problem of conflict of interest...

You know, the USDC stablecoin was co-founded by Coinbase, which is also a leading exchange platform. They're in the same boat as us, yet there's less debate about it.

I am the CTO of both Tether and Bitfinex, but things are very separate. We are very careful not to mix our two businesses.

Not everyone has to like us; we feel that Tether and Bitfinex should be run by the same people, as these companies are central to the development of the ecosystem.

Why hasn't the CEO of Bitfinex and Tether, Ludovicus Jan van der Velde, appeared publicly for several years?

I can introduce him to you if you want. To tell you the truth, he is not a public figure.

When the project started in 2014, Ludovicus couldn't have imagined that Tether would become what it has become today. Not everyone is prepared for the public exposure that comes with it... And I'm much better at making memes on Twitter than he is (laughs).

Did you see the collapse of FTX coming?

I always thought it was too good to be true. They raised a lot of money, but they were spending it all on marketing.

You know, I run a trading platform. I know how much fee you can recover based on your volumes.

Given their numbers, there was no way they could be profitable. You can't spend billions of dollars on stadium naming and at the same time offer fees 10 times lower than the competition without there being a problem. When I said this, until recently, I was told that I was biased, because I was a competitor...

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Find the best of the crypto, NFT and DeFi news every Wednesday and Thursday in the two newsletters written by our specialised journalists Grégory Raymond and Raphaël Bloch.

Paolo Ardoino (Tether): "We are the most resilient company in the industry"
Published on
Published on
March 29, 2023

Paolo Ardoino (Tether): "We are the most resilient company in the industry"

‍Criticized for its lack of transparency, Tether seems stronger than ever with its stablecoin, USDT, worth over $70 billion. The Big Whale spoke with its chief technology officer (who is also CTO of Bitfinex) about this insolent and troubling financial health.

The Big Whale: Tether's crash has been announced 1,000 times, and yet you're still here. What does this inspire you?

Paolo Ardoino: For years we have been attacked, criticized, some hoping that Tether will collapse, but this is not the case. Why not? Because their attacks are unfounded.

We are in contact with the US regulators, a lot of things have been audited. I think we are the most scrutinized and also the most resilient company in the industry. 💪

There was some criticism of your reserve. You recently switched from commercial paper, which are composite corporate bonds (several types of loans bundled together), to U.S. Treasuries, which are supposed to be much stronger. Isn't that a sign that there was a problem?

There were some untruths about it. Many said we had commercial papers without saying they were good quality. We had the ones with the highest ratings.

We then moved into T-bills because there was a demand from our clients to do so and it seemed like the right strategy.

The Silicon Valley Bank fell in 48 hours while its coffers were filled with U.S. Treasury bills...

Do you want to read more?

Only premium subscribers have access to this article!
Sign up to access the best content, get exclusive info and join the whale community. 🐳

Subscribe for free to read more.

Yes, but we're talking about 30-year bonds, that was bullshit! They put all their clients' money into bonds that were absolutely illiquid, and they did it because they wanted the highest possible return (in principle, a long maturity pays more, ed. note), and it paid off in cash. 💥

For the USDT, this is not the case at all. We only have US Treasuries with short maturities. To give you an idea, today we are on maturities of less than one year.

The irony is that we were able to swap our commercial paper for Treasuries without difficulty, while Silicon Valley Bank and the other banks failed.

What is your financial situation?

We've never been better. In the fourth quarter of 2022, we made $720 million in profit. In the first quarter of 2023, which ends in a few days, we'll probably do the same. At least $700 million in profits. 🤑

What do you plan to do with this substantial income?

Most of this money will be reinvested in the company to develop technology and new projects.

At the same time, we will continue to diversify the reserve by investing in assets such as energy infrastructure ⚡️.

Is proof of reserves an effective way to demonstrate the creditworthiness of exchange platforms?

We have a proof ofreservations for Bitfinex. I think it's a good solution, but only if you see it as a first step, because the problem with this system is that it doesn't take into account the debt of the companies, so it's something biased.

To succeed in making a more complete proof of reserves, you have to work with audit firms. Afterwards, even with auditing firms it's not easy, because auditing a platform with so many transactions still requires some acculturation. Can you imagine me explaining to auditors how Monero or Solana work? 😅

While waiting for full audits, how can you reassure your customers?

You can see publicly on the blockchain that Bitfinex controls the second largest bitcoin wallet in the world (198,000 BTC or $5.7 billion, ed.) while we do "only" 10% of the volumes of our competitor Binance (which controls more than 530,000 BTC, or $15 billion ed.)

We don't need to make ourselves look better than we are. Bitfinex has a very strong customer base, that's the most important thing. We focus on them and they trust us because they see the technology and public wallets.

However, coming from a traditional finance background, I understand that some people prefer to hold their funds themselves. Our institutional clients can leave them with a third party like Fireblocks or Copper, and do their trading on Bitfinex.

Tether was not affected by the recent banking turmoil, but your competitor Circle (USDC) was heavily impacted, at least for 48 hours. What are your thoughts on this?

Nobody can be happy about what happened. If Circle is in trouble, it's not good news. Our goal is not to be the only one in the market, because when you are the only one, there is no market...

What is your main difference with Circle?

In terms of transparency and reserves, our certificate is three or four times longer than theirs. Otherwise, Circle's main market has always been the United States, which is probably the least attractive market for us. Trying to sell a stablecoin dollar on Wall Street is like selling a mass to the Pope, it's just a no-brainer!

For us, the objective is not to provide a new tool to banks, but to enable 2 billion people who do not have access to banks to access financial services.

We want our stablecoins (read our report 💡) to be available in other parts of the world where we think there are real needs, like Turkey or Argentina (read our report) where the currency is collapsing.

Circle announced last week that they are setting up a European headquarters. Their objective is clearly to accelerate and become compliant before the arrival of the MiCA regulation. What is your strategy in this regard?

We are obviously following the subject closely. I think it's great that MiCA is putting rules in place and giving Europe the opportunity to protect its market by favoring euro stablecoins over dollar stablecoins.

But you also have to bear in mind that this will potentially have an impact on the whole market, because MiCA is quite restrictive with stablecoins, especially on volumes. The risk is that there will be no stablecoin at all in Europe. 🇪🇺

How to find the right balance?

It's not simple, I admit. The only thing we know for sure is that stablecoins are ultra dominant.

As you know, we already have a euro stablecoin, Euro Tether, and it weighs just over $40 million. In contrast, our dollar stablecoin, USDT, weighs more than 1,000 times as much ($70 billion, ed. note)!

Will regulation allow euro stablecoins to emerge? That is the real question. In any case, no one can guarantee it. In addition to regulation like MiCA, we also need to create incentives to use euro stablecoins.

You are present almost everywhere on the planet. What are the regions of the world where the USDT is the most used?

It is not in Europe or in the United States, but in the regions where the financial system is least developed, i.e. Southeast Asia, Africa and South America.

What do you think of the French crypto ecosystem?

It is quite impressive. You have several very large companies like Ledger which is a great standard bearer for France.

There are also companies like LN Markets in which we have invested (its sister company Bitfinex has invested, ed. note). I think the Italians have the best food and France has the best crypto companies (laughs). 🍝

Do you have a specific plan for your euro stablecoin?

Euro Tether has been launched on several platforms like Huobi or OKX. This strategy shows that we want to develop this product, also because there is demand.

Have you published an audit about the Euro Tether?

We did it with the dollar stablecoin and we're going to do it with the euro stablecoin, but right now it's not easy to convince the big audit firms to do it.

There are still no clear rules on these subjects, so audit firms like KPMG or EY are asked to apply rules that they have to invent at the same time.

They don't want to risk certifying the stablecoin pool that could be affected by regulation.

What do you think about the regulatory pressures on the crypto industry in the US?

I think this is a huge opportunity for Europe to become a home for the crypto universe.

After that I don't buy the story that the US doesn't want crypto anymore. There is still a lot going on there, there are very large projects. Their problem is that without clear regulation, it's the regulator that's cleaning up the mess and that's doing damage. 😬

Which countries do you think are the most welcoming for crypto?

I would say Switzerland and France for Europe, although MiCA will smooth that out.

Singapore is very attractive in Asia, Dubai in the Middle East and clearly El Salvador in South America.

Beyond the Bitcoin ads, what makes you say that about El Salvador?

They are doing a lot of things: There is obviously the legislation on cryptos and especially Bitcoin, but there is also their mining project with the energy of volcanoes, then their ambitions in Tech.

They are very attractive. Bitfinex is working with them locally. El Salvador does not have a national stock exchange, so we will help them with our infrastructure to distribute their digital assets.

Many say that El Salvador's crypto turn is primarily marketing. What do you think about it?

I had this same impression 18 months ago, before they made bitcoin their legal tender. I thought it was mostly buzz, then I met President Nayib Bukele...

I had dinner with him a few months ago, and honestly, I was blown away. I'm Italian, so I know what politicians are like and I know they can tell stories, but here they really do things. 🇸🇻

Isn't there a gap on the subject while the country remains affected by violence and poverty?

Here we are talking about the monetary dimension. Bukele has a choice between the dollar, which is not his currency, and bitcoin, which can allow him to regain sovereignty, so he chose his side, and I think he made the right choice.

He will surely not be the only one to make this choice, you will see. I wouldn't be surprised if this happens even in some European countries.

What do you think about bitcoin?

I think it's clear that Bitcoin has proven itself to be an asset in its own right, both anti-inflation and capable of serving as a financial structure.

In our "Manifesto for Freedom" (published in November 2022) we pledged to promote the development of the Lightning Network, which will make bitcoin a cost-efficient and fast means of everyday payment.

What do you think of central bank digital currencies? Do you think like some that it is the "absolute evil"?

Most central bankers like to say they are working on MNBC projects to give the impression that they are at the forefront of innovation. But keep in mind that they, too, are afraid of such projects.

They are not crazy and they know they would be putting their finger on something potentially out of control. MNBCs are a one-way street. 😓

What does that mean?

When you launch a project like this, you have to keep in mind that it can have an impact on consumers, businesses, banks, in short on society as a whole. With MNBCs, it is possible to set negative or positive interest rates, to control the money supply, quite simply.

Take your cash, no one can take it from you when it's in your pocket. Imagine tomorrow that you have MNBCs. The state will tell you that everything is fine and then if all of a sudden they need money, they can take it from your pocket by putting negative interest rates.

Put in the hand of an authoritarian power, as in China, it could go even further.

How do you see Tether in the years to come?

Today, Tether manages USDT, which is the largest stablecoin on the planet. USDT is great, but it is only a digital asset based on the dollar.

I think our best product today is Tether Gold, which is a stablecoin based on gold. I think that gold is not a competitor to bitcoin because Bitcoin has already won the battle, but it is a great alternative.

We've talked a lot about the problems of the banks in recent weeks. Who are your American banking partners?

We work with Cantor Fitzgerald in particular, but in general we tend not to rely too much on the US banking system.

We have been criticized a lot for this choice, but for us it is not possible to work with such a fragile banking system, and what happened recently with Silicon Valley Bank and other institutions is the best proof of this.

Who else do you work with then?

We have banking partners in the Bahamas, Asia, and other regions, but not all are public.

You are also criticized because the same team runs two very important companies in the ecosystem, the exchange platform Bitfinex and Tether. How do you respond to those who accuse you of mixing genres?

Why should that be a problem? We created these two businesses, why should we give our golden goose to someone else? 🤑

But you can see that there is a problem of conflict of interest...

You know, the USDC stablecoin was co-founded by Coinbase, which is also a leading exchange platform. They're in the same boat as us, yet there's less debate about it.

I am the CTO of both Tether and Bitfinex, but things are very separate. We are very careful not to mix our two businesses.

Not everyone has to like us; we feel that Tether and Bitfinex should be run by the same people, as these companies are central to the development of the ecosystem.

Why hasn't the CEO of Bitfinex and Tether, Ludovicus Jan van der Velde, appeared publicly for several years?

I can introduce him to you if you want. To tell you the truth, he is not a public figure.

When the project started in 2014, Ludovicus couldn't have imagined that Tether would become what it has become today. Not everyone is prepared for the public exposure that comes with it... And I'm much better at making memes on Twitter than he is (laughs).

Did you see the collapse of FTX coming?

I always thought it was too good to be true. They raised a lot of money, but they were spending it all on marketing.

You know, I run a trading platform. I know how much fee you can recover based on your volumes.

Given their numbers, there was no way they could be profitable. You can't spend billions of dollars on stadium naming and at the same time offer fees 10 times lower than the competition without there being a problem. When I said this, until recently, I was told that I was biased, because I was a competitor...

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Do you want to join the Web3 revolution?

Find the best of the crypto, NFT and DeFi news every Wednesday and Thursday in the two newsletters written by our specialised journalists Grégory Raymond and Raphaël Bloch.