Paolo Ardoino is the CEO of the $114 billion stablecoin issuer Tether. In this interview, we discuss how he has evolved Tether’s strategy since becoming CEO, how the company is adapting to new competitors such as State Street and growing regulations, whether they will issue a yield-bearing token, and how the presidential election could impact Tether and stablecoins more broadly.
Forbes: You've been CEO since December. How has Tether’s strategy evolved since then?
Paolo Ardoino: Since I took the reins as CEO, we have transformed Tether from just being a stablecoin company. Though saying we are “just a stablecoin” undersells our impact because USDT is the biggest stablecoin in the market, the biggest by volume, bypassing bitcoin, ether and many other tokens combined. It's growing its user base daily and has more than 350 million users globally. For many companies that would be enough. Still, one of the realizations we had as a company, and I also had because of my tech background, is that what we did with a stablecoin is called disintermediation. We could build something that would disintermediate or remove the unnecessary intermediaries. There are actors and stakeholders in any process, but unfortunately, there are too many in finance. It is about efficiency, and we created a better, more efficient digital dollar. I don't even consider USDT as a cryptocurrency anymore. I think it’s the digital dollar, at least the digital dollar for 350 million people around the world. It's not peanuts; that’s almost 5% of the world’s population. What we did is also realize that intermediation is a plague that is permeating many other industries.
We thought about the telecommunications industry and are investing in Holepunch as a peer-to-peer communication protocol. Education is another one. Education is becoming increasingly politicized, but it should be objective and more direct. In terms of students, I’m not sure about the U.S., but in Europe, no one had the tools to educate children during Covid. They had to build them in a rush. But now that there is no pandemic anymore, those tools will disappear. They spent billions and billions, and now these billions are wasted, and we will go back to the old teaching model.
Artificial intelligence is another big field of investment. The problem with AI is the intermediation in the form of control over AI, making it very politicized or as a way to collect a lot of information from people who are uploading on ChatGBT much more information than they were uploading on Facebook. Tether is working on local artificial intelligence. It's a way to disintermediate one of the technologies that will be more disruptive for humanity than anything in the last 5,000 years.
Forbes: Another thing you mentioned in an interview we did in the spring is how you're trying to build for the apocalypse. I assume that dovetails with your disintermediation theme. Could you expand on that?
Ardoino: There are three things that we look for. One is disintermediation, the second is resiliency and the third is independence. If you have these three things, we can build a society for the apocalypse. Why are they important? You want to ensure that if you are in a local community–no one is advocating for anarchy–you also need to make sure that your survival does not depend on decisions that are made 7,000 kilometers from you. The problem is that most of our daily life is covered by tech. And if you are a small country, you don't have control over tech, you don't have control over communication systems, you don't have control over energy production and you don't have control over money.
Let's think about El Salvador and similar countries. They have money that has been adopted or is not controlled by them. For example, they use the U.S. dollar or technology developed by someone else, Google, WhatsApp, Zoom, etc. So, all the technology being used worldwide is controlled by these companies. The beauty of the internet was to build resilient technology that would foster the spread of information. The internet is built to survive the apocalypse because if there is a mini asteroid, God forbid, in any part of the world, the web is a network and can self-heal. But yet, although we built that incredible thing called the Internet, we centralized 70% of the information across three companies: Amazon, Google and Microsoft. We build systems that are resilient to that. When it comes to money, we have bitcoin and, to a certain sense, USDT. When it comes to communication, we are building a solution for that. When it comes to AI, we have local AI. Regarding education, we have tech platforms based on the peer-to-peer communication system we're building, among others.
Forbes: Would you say that being able to take this approach is a privilege because of how profitable Tether has been and the fact that you don’t need to take on LPs, at least right now, to make these investments?
Ardoino: USDT is making good money. Give or take, we made $11 billion in the last two years, and the majority, more than 90%, was kept in the company. Why? Because if we distributed that money, we couldn't do any of this stuff. Instead, having that vital buffer outside the reserves allows us not to worry about making something profitable tomorrow. If we succeed, people can build services and businesses around this technology and make good money. We are Bitcoiners. We come from that ethos, that philosophy. That’s how I describe it to the people who work with us because I believe–I’m probably smoking my opium here–that Tether is a company that is only born once in 100 years.Tether is lean; it is a private company, so it can make decisions flexibly and decide what to do with the profits. If you're a public company, hundreds of shareholders will knock at your door because they want dividends, and everyone will have their ideas. We have our idea of what type of things humanity needs. So imagine being a highly profitable company, where shareholders agree to keep almost everything (all the profits inside the company) and use those profits to build things that we believe will make humanity better, more resilient, more independent and ready for the apocalypse. Imagine wasting an opportunity that big. We are simple people; we don't need much, but we want to use the opportunity in the best way possible to build things we think make sense.
Forbes: Coinbase is making some significant inroads with the adoption of Base and building an entire ecosystem. Is there an opportunity for Tether to construct some L2 or blockchain platform?
Ardoino: Tether will soon announce new products for finance, for example, that are blockchain-based. I was public about our new digital asset tokenization platform, which will be launched by the end of the year. That is an example of a new product. It will use all the technology that Tether built in the last 10 years, securing more than $113.6 billion today, and make it available to everyone in a non-custodial way. But Tether should not launch a chain. Blockchains, for most of the part, are casinos, and there’s not much glory in them. Some chains are very interesting. For example, the Telegram blockchain has an ecosystem of a billion people who can transact and send payments. That's a clear value proposition for every product. You need to have a clear value proposition, but many chains don't have it. They’re very centralized and are a way to issue yet another token. With our resources, I hope at least that we can come up with something better and more interesting for the world to do.
Forbes: Regarding chains, you recently announced that you will stop minting on Algorand. Are there other chains you have similar concerns about, or are there others you’re excited about or considering for minting tether?
Ardoino: We announced in the next six months that we are stopping servicing Algorand EOS, Bitcoin Cash, Kusama and Omni, which was our first one. It’s not about having security concerns. It’s more about usage. When you support a chain, there is an ecosystem, not only internally but externally. It takes time, a security team and a lot of effort to monitor the chain. We want to ensure that if everyone has put effort into a specific chain, it is because there is enough interest and usage for USDT. Otherwise, it would be a waste of resources, and we would like to remain lean as a company. We want to be flexible and keep building awesome things like we are now. So we sometimes need to make our own decisions and cut the branches that are not working correctly.
Forbes: Forbes published a story called The Rise Of Crypto’s Billion Dollar Zombies, in which we called out 20 L1s with at least a billion-dollar circulating market cap for essentially being functional zombies. We mentioned three of these chains: EOS, Bitcoin Cash and Algorand. I always thought Kusama was a bit of a test net, and Omni was something that just launched.
Ardoino: Tether launched on Omni, so it was not an easy decision. The worst thing about having processes is not following them. Tether has internal processes–and Tether is scrutinized in many areas–for everything, including managing reserves. So if we decided that there were criteria for listing a chain, even, unfortunately, our original chain, we had to do it.
Forbes: How much money would you say you've invested so far?
Ardoino: Around $3 billion.
Forbes: I’ve asked you this before, but Is there any update on getting an audit done?
Ardoino: My answer is similar every single time. Let's put it this way: you know that in the past, I’ve complained about the fact that Senator Elizabeth Warren [D-MA] was not helpful by basically warning auditing firms not to take on more crypto companies. A big auditing firm might service 50,000 banks, and each of those banks would pay them maybe $1 million annually. Imagine that you have these 50,000 banks, and then you have one stablecoin company. What would your 50,000 customers say about the fact that you onboarded a stablecoin that is probably its strongest competitor? So, it is not very easy as a selling point for the big four companies (Deloitte, PwC, KPMG and EY). But I also think that given the Warren problem, if a new government were more pro-crypto, that problem would probably solve itself.
Forbes: Short of an audit, are there any procedures or confidence-building measures you can share so that USDT holders know there is a powerful firewall between profits and collateral funds? I know you're sitting on a multibillion-dollar profit, but you're also writing nine-figure checks for some of these investments. Playing in AI is not cheap.
Ardoino: We have Tether International Limited (TIL), the company managing the stablecoin. It has the reserves plus the excess reserves (we keep around $5 billion in excess reserves). There is segregation; they have separate bank accounts. The investments are done through Tether Investments, which is a separate company. The investment in AI is not part of the reserves.
Forbes: You're the CEO of Tether. You're also the CTO of Bitfinex, which is a critical exchange. Have you considered whether staying in these two roles is sustainable? Will there be a time when you may focus only on Tether since you are going after some enormous ideas?
Ardoino: I'm also the CSO of a Holepunch. The thing I do is leadership. I participated in building Bitfinex. We have brilliant, talented developers. We have people who are capable of running the ship in a very tight, secure way. I like to mentor and care for those who formed and helped grow both Bitfinex and Tether. I often interact with different stakeholders to set strategies or give advice on how I think things should be done. I have a sound vision of how things should be done. I'm very annoying with the details as well. If I feel that I will be sloppy in any of the roles, it definitely will be time to delegate even more. But for now, everything is working reasonably well, and I have the time to focus on all the things that I want to do, and probably there will be a few more that I will do.
Forbes: Regarding your $400 million investment in the AI provider and bitcoin miner Northern Data, there's been a lot of news, including a rumored IPO and a lawsuit from a couple of employees claiming tax fraud. Do you have any reaction?
Ardoino: We have yet to decide [about an IPO]. [Regarding the suit], rumors will always be around.
Forbes: Given Trump's surging electoral prospects (Editor’s note - this interview was conducted before President Biden withdrew from the 2024 race), how would a Trump administration impact Tether?
Ardoino: It's tough to anticipate what will happen. I cannot call myself an expert in U.S. politics. I hear and see more progress toward reducing the pressure imposed upon crypto, especially from the SEC. I grew up in the 1980s and 1990s, looking at the United States as a place of innovation and a country that would save the world. Using the movie Armageddon as an example, this is the role that the United States has always played in the minds of everyone worldwide. Then you see the behavior in crypto, and it feels very counterintuitive for someone who lives abroad and is not American.Why is this happening? Why isn’t the U.S. seeing how great this stuff is, and why aren’t they taking the lead? There is a significant opportunity for the U.S. to take back the lead and provide clarity for the rest of the world. Everyone is waiting for the U.S. I think the approach taken in the next 16 months from the U.S. will be critical. The U.S. will have the opportunity to showcase that they believe that crypto is here to stay and, of course, needs to be regulated in a way that makes sense.
Forbes: What is your sense of Trump's knowledge of crypto positions? Ethereum founder Vitalik Buterin published a post criticizing people in the industry who are going pro-Trump just because he's now saying nice things about crypto. Trump said that he wishes all future bitcoin would be mined in the U.S. You’re financing bitcoin mining elsewhere, and concentrating all mining activity in one country is probably antithetical to your idea of decentralization. What are your thoughts?
Ardoino: One of the reasons Tether was investing in bitcoin mining was that there were mixed feelings from the U.S. government about bitcoin mining. We are always, of course, supporting countries concerning bitcoin mining. If Trump wants to mine all the bitcoins in the U.S., there will be a commitment to make the energy feed available to bitcoin miners. It's impossible that every single bitcoin will be mined in the U.S., of course, but it means that at least they will be part of the race, which is the crucial part.
When it comes to Vitalik, people vote for things that they believe in. You vote for the candidate who is best representing your vision for society. The way Vitalik described it, it felt more like people wanted someone pumping their bags. That isn’t the case. I think people want to feel at home, and you feel at home more with a candidate supporting something you genuinely believe in.
Forbes: Yield-bearing stablecoins are starting to be launched. There's always been commentary around Tether that it doesn’t share yield with token holders. What are your thoughts on that?
Ardoino: There are two reasons why we don't share the yield. The first one is that it would make the product a security. The second part is that the yield is very small compared to rampant inflation. Take Argentina, where the national currency was devalued 98% against the dollar in the last five years, and the weekly volatility of the Argentina peso was 4%. Imagine giving someone 4% per year when their intraday volatility of the local currency is more than 4%. Of course, everyone wants more money if they can get it. But that's why USDT does not make sense to ordinary Americans. In the United States, you have Venmo, PayPal and 15 other methods to hold and send money. People in different places in the world cannot do that. And so those people also don't need the yield on top of an excellent service. They have already made 600% on USDT, so they don't need 4% more. With that 4% more, we can reinvest in building great technology to foster financial inclusion. Teter helped to solve financial inclusion almost single-handedly.
Forbes: There's reporting this week that State Street wants to launch its stablecoin, and I imagine more will soon follow.
Ardoino: I welcome other stablecoins. Given the amount of money that we make, of course, there will always be competition. I would love to see more competition in emerging markets, but we have success in those countries in the first place because the banking system left those countries hanging; those countries are not very profitable for them. Tether is successful because we serve as their checking and sales accounts. So if State Street or anyone else wants to come into those countries and compete with us, we are happy because, in the end, we've made more money than we could believe and think and dream for hundreds of years. So if someone will step in and gain another 300 million users and help those countries, that's great. I mean, we are still humans and believe in humanity’s progress.
Forbes: You run one of the largest Treasury portfolios in the world. There's a lot of talk about a steepening curve, the spread between long-dated and short-term Treasurys, and perhaps a resumption of inflation. In September, people expect the first FOMC rate cut, and regardless of who is the president in January, there is expected to be a rise in U.S. debt. How do you think about that as you continue managing your Treasury portfolio?
Ardoino: Short-term Treasurys and overnight reverse repos are the answers. With the overnight reverse repos, we can access all the liquidity we need in case of mass redemptions like $10 billion or $20 billion daily. That's how you get liquidity. Then short term, like 90 days maturity, T-bills put yourself in a good spot regarding potential rate cuts. There might be some cuts due to political reasons, but we don't see a huge change. We don't see rates going to zero again or near zero. Again, imagine a company with $113 billion in market cap; even if their rates stay around 2% or 3%, it's more than enough to keep building–even 1% would be more than enough.
Forbes: There are many questions about how USDT aligns with the new crypto legislation in Europe, MICA. What’s your strategy to ensure any European-based exchanges don’t delist it?
Ardoino: You might remember that I was very public about my concerns about MICA and the requirement of 60% in non-insured cash deposits, like what happened to Circle with Silicon Valley Bank in 2023. They lost $3 billion and then survived because the FDIC stepped in. My problem is that USDT–and I know I sound like a broken record–to me, is a tool that helps 300 million people. So I don't want to endanger those 300 million people holding USDT because I have to keep the 60% in uninsured cash deposits in a European bank. There are better ways to do it than that. Many people reached out to me privately, saying thank you for saying that.
MICA also creates restrictions on how much you can trade or make. People asked me if I was concerned about that. I’m not. That is a restriction to protect or create a sandbox, which is fine. That restriction improves or reduces the risk. Conversely, a 60% cash deposit requirement increases the risk.
I was reading that after Circle said we got the license, they also said, “Oh, by the way, it's risky.” So it's all fun and games until someone loses an eye. I believe it is important for companies like Tether to keep talking to regulators to make them understand that these are significant risks, and stablecoins and European-based stablecoins that will keep so much money in the European bank will become systemic risks and increase the likelihood that European banks will go belly up. Imagine this scenario: you have $10 billion. You have a market cap of your stablecoin; $6 billion has to be kept in cash deposits, or 6 billion euros has to be kept in cash deposits. The bank can lend out 90% of that. It means that 5.4 billion euros can be lent out. So 600 million euros will be capped in the bank’s balance sheet. Then you have someone coming to you and asking for a $2 billion redemption. Tether sold that in 2022—that kind of pressure. So, 2 billion euros, redemption, and the bank has only 600 million euros. What will happen? The bank will go bankrupt. Everyone will blame the stablecoins, but even more so, in this way, you can prove, and it's easy to understand that that type of requirement of MICA will create a systemic risk for European banks.
Forbes: Thank you.
