#1243 Paolo Ardoino | Tether Founder Reveals Truth About Reserves

Paolo Ardoino is the CTO of Tether. In this conversation, we talk about the rise of stablecoins, whether the market is winner-take-all or not, treasury management, how they ensure the peg stays actually backed by dollars, regulation & audits, accumulating bitcoin, banks, FDIC insurance, and more. ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone. This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Paolo Ordano is the CTO of Tether. In this conversation, we talk about the rise of stable coins, whether the market is winner take all or not, how they think about treasury management, how they ensure that the peg stays actually backed by dollars, what he

• 0:44Anthony Pompliano?

  thinks about regulation and audits, how they think about accumulating more Bitcoin, where the demand for Tether will increase or decrease if banks become more friendly, the importance of FDIC insurance, the popularity of Tron and Binance Smart Chain as blockchains for Tether, and what the impact in terms of stable coins will be on Bitcoin adoption globally. I really enjoyed the conversation with Paolo, even the parts where we get into how big the business is, both from a revenue, a profit, and an employee headcount standpoint. I think that you'll learn a ton in my conversation, and I'm really excited to hear your feedback. So once you get done listening, jump onto Twitter and go ahead and let me know. What did you like? What did you not like? What questions do you think were answered well? And what questions do you think I should have asked that I didn't? All feedback is

• 1:29Anthony Pompliano?

  welcome. Here is my conversation with Paolo Ordano.

• 1:34Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

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• 2:27Anthony Pompliano?

  Alright guys, bang bang. Paulo, I thought a great place for us to start this conversation is the rise of stablecoins. Obviously, they used to be very small, almost nonexistent. Now, we have about $125 billion market cap, of which Tether is the largest stablecoin. Can you talk about the last couple of years and from your perspective, how important stablecoin popularity in crypto has been?

• 2:49Speaker 03

  Yeah, sure. So, as I said, the stablecoins had a little bit of a history. Tether was founded 9 years ago, actually, the 6th of October. Tether had his 9th birthday. And yeah, in the last few years, though, the stablecoins changed from being a product, basically designed at the beginning for cryptocurrency traders, for helping moving fiat across different exchanges to help arbitrageurs and so on and forth.

• 3:30Speaker 03

  But with COVID, with the increased devaluation of national currencies, especially in emerging markets, and thinking about Turkey and thinking about Argentina, Venezuela and so on, stablecoins more and more have demonstrated to be an asset that considered a lifeline for communities living in developing countries. And the fact that the economy suffered a big hit during the pandemic, the fact that inflation is going through the roof more and more, and the crypto markets in general have been suffering as well,

• 4:14Speaker 03

  as well as the general financial markets. People in this moment want to find safety, try to find stability in their life. They don't... This is a period in which speculation is not definitely the first thought of people, right? So, they want something that is predictable, something that they wake up in the morning, they know that they have the same, pretty much the same purchasing value or power than the day before, the week before. If you think about the Turkish lira, the Turkish lira devaluated around 80% in the last 18 months compared to the US dollar.

• 4:57Speaker 03

  And so, um, if you are a Turkish person, probably you would prefer to keep your funds in USDT in Tether, USDT rather than in Turkish liras. And so it has been, um, an interesting shift. Um, also is, uh, I would say when, when Tether created, uh, USDT, uh, we could not believe, uh, we could not think to all these use cases. Of course, the growth has been immense and, uh, you know, we are, you know, every day when I wake up, I'm, I'm still surprised about the, the, you know, the, the growth of this pace of this industry.

• 5:34Speaker 03

  Um, yet it's, uh, I think, uh, I, I like, uh, what, um, the, the, the real true purpose of stable coins. I like the fact that they are now used by hundreds of millions of people, uh, around the world to find, uh, stability, to find, you know, to, to be used as a way to transfer wealth, to store wealth and so on.

• 5:56Anthony Pompliano?

  And when you think about people in, whether it's Turkey or other areas where there's hyperinflation or a significant devaluation, I think the story for a long time had been Bitcoin is, uh, the solution, right? People are going to go and they're going to buy Bitcoin. We see that happening to some degree. There are definitely people in these countries that buy Bitcoin. But it seems like also a lot of people are buying stable coins as well. And the reason why I kind of positioned it as if you're in a, a dire financial position, right? Your, your economy is, uh, kind of wobbling, your currency is being devalued. If you have an internet connection, you now have choice. You can choose from a couple of different currencies. And it does seem like people are choosing stable coins and Bitcoin. Does your expectation it will continue to be stable coins and Bitcoin?

• 6:40Anthony Pompliano?

  Or do you think that stable coins serve like a really interesting, uh, kind of solution for these individuals where maybe Bitcoin isn't going to be used for medium of exchange and only for store of value? Or how do you think of these two assets and their relationship to each other?

• 6:53Speaker 03

  Well, I think we cannot discount the fact that stable coins are, the majority of the stable coins in this 125 billion are actually representing US dollar stable coins, right? So if you think, but there are euro-based stable coins, Tether has EuroTether, that was launched in 2018, 2019. And the reality is that, I think the market copy is ridiculous compared to USDT. The reason is that everyone wants the dollar in this world. So, dollar is the most established asset and is the most, everyone knows it, right?

• 7:35Speaker 03

  So if you talk to all the generations, from the youngest to the oldest, they know dollar, they know gold. Actually, the second biggest stable coin that Tether has created is XLT, is a stable coin that is fully backed by gold. But that tells you that people, you know, the euro was there, has been there since the last 23 years.

• 8:02Speaker 03

  Dollar has much longer life, gold has, you know, 5,000 years of history. And so, people tend to go to things that they know that are solid, that have been in their families or, you know, understood by their families for generations. And so, you know, the dollar has still that sort of mark of stability and among all the inflation, all the devaluation of the different national currencies, in the end, the dollar is the safest one among all of them, right? So, the dollar is the biggest economy in the world and so provides more assurance to people that have to, that need to choose where to put their savings.

• 8:47Speaker 03

  Bitcoin is the newest of all the currencies and we are seeing adoption, right? I'm personally a Bitcoiner and every time I talk about Tether, I also try to talk about Bitcoin because I think one of the roles of stable coins is never forget that it's their role as for sure innovators, but also their role as companies that should foster financial freedom. And Bitcoin is the ultimate financial freedom, right? So, but it just takes more time for people to understand it. Younger generations are more prepared to that, to this discussion, to understand intrinsic

• 9:26Speaker 03

  value, to understand the fact that, the fact that there are computers governing Bitcoin is not a scary thing, is actually a positive thing. As I think that since there is no mother nature, that as with gold, you have mother nature, you have the nature that, you know, you have a fixed amount of, or limited supply of gold in the soil, and that is what people were used to and are used to when they think to as cars asset. The fact that computers are basically running Bitcoin shouldn't, you know, shouldn't be scary, but is actually kind of scary or kind of weird for many still. And I think we as an industry should do

• 10:10Speaker 03

  a better job or should keep doing, or improving the job that we are doing in explaining and holding people towards Bitcoin.

• 10:20Anthony Pompliano?

  Now, when we think inside of the stablecoin market, obviously dollars on a blockchain are the most popular, as you mentioned. But there are now multiple companies or organizations who have created dollar-backed stablecoins. And so the two most popular being Tether and USDC, but there's a plethora of others that have come into the market and each one has varying degrees of success. When you look at the market, is it a winner take all, winner take most? Do you think it's actually important to have multiple stablecoin, you know, dollar-backed stablecoin winners? Like, how do you look at almost competition for the dollar-backed stablecoin itself?

• 10:54Speaker 03

  Yeah, I think, look, I like to think the stablecoin as an industry, I don't think an industry can exist with only one player. And you can see how much this, the stablecoins are subject of discussion among regulators in different parts of the world. If the stablecoin industry would be made by a single player, I mean, wouldn't not be an industry and probably, you know, every regulator would have, you know, reason to shut it down in a way, right? Because, you know, if there is only one company that can do it, is, could be a weird thing, right? So you want to have diversity, you want to have like, the ability of people to choose, to look at the options, to look at the track, historical track record.

• 11:38Speaker 03

  And all these type of things. I think in being many, we are giving and providing a good use case and good diverse case to regulators to make them understand that this is a growing technology. Again, if there was one single company, it wouldn't, you know, would be feeling weird, right? So why, why no one else would, would, is doing this, the very same thing? And Monopole is never, never good, I think. What I also think is that, for example, Tether, USD TA is not onboarding US customers.

• 12:16Speaker 03

  So there are, I heard, well, I think it's bosom news PayPal is, is launching is US dollar or has launched is US dollar stablecoin, starting from the US.

• 12:32Speaker 03

  You know, you can argue Circle is focusing and or that is one of their main focuses. So the world is a big place. I think Tether has an eye towards emerging markets and developing countries. So I like the fact that, you know, diverse geographically, I think diverse in, in, in in the way they are run, in the philosophy that, that is behind the scenes and so on. So actually it's a good thing.

• 13:02Anthony Pompliano?

  Now, when you think about Tether and kind of the adoption that it has received, one of the big questions has always been around treasury management and then also regulation. And sometimes those two things are related, other times those two things are completely separate, right? If you were to almost think about it as a business, right? You've got some people who are dedicated to doing treasury management, do it as well as possible. And then you've got other people who are worried about regulation and being compliant and stuff like that. And so how do you all think about treasury management, maybe as just like part of the internal business and what you guys do? And then how does that relate into any of the regulatory, either inquiries or oversight that you all are subjected to?

• 13:41Speaker 03

  That's a great question, right? So I'm in the face of Tether for quite a few years. And I think one of the best things that happened in the last two years is trial by fire, right? It's easy to say, well, you know, what's going on behind the scenes? And, you know, are you doing this? Are you doing that? Right? So, and of course, I go on and I go on shows and explain, yes, we are doing this type of things. We are extremely serious in risk management. We have a team. We have extremely professional people that are day and night are monitoring the markets, are trying to understand microeconomics.

• 14:27Speaker 03

  They are, you know, among the best people that someone could aim for their company when it comes to treasury management and risk management. I mean, I feel so lucky to work with this team. Yeah, there is an interesting aspect that, you know, talking about 2022 and 2023, with starting with Terra Luna, also Tether became under attack, you know, classic flood of campaigns. And Tether proved in May 2022 was able to redeem $7 billion in 48 hours, $20 billion in 20 days. A good testament of, you know, the solidity of Tether and solidity of banks, right?

• 15:10Speaker 03

  When we think that $7 billion were 10% of the reserves and $20 billion were plus were 25% of the reserves. I mean, it's then you start asking or looking around at the banks that, you know, and see and ask yourself, would the banks be able to survive to that type of scenario? The answer is no, right? In 2008, there was a bank called Washington Mutwell, went bankrupt for 10% of their of redemption of their reserves.

• 15:41Speaker 03

  In 2023, we had Silicon Valley Bank, we had, sorry, Silicon Valley Bank, Silver Gate. All were shut down for improper management of, or too much risk in their portfolio, from my understanding. And it's interesting that one of our main competitors actually was, had a lot of cash, uninsured cash on one of those banks. And so what we did at Tether, we always thought that the banks as partners for sure for Tether, because Tether is a USDT, is a

• 16:20Speaker 03

  centralized stablecoin. So it means that it's using, it's using blockchains as a transport layer, but the issuer is centralized. And so hence, as a centralized stablecoin, has to use the banking system. But using the banking system doesn't mean trusting blindly the banking system. Means that the most important aspect of our life at Tether is protecting the portfolio. And when you want to protect the portfolio, I mean, the obvious question is, where a stablecoin doesn't put, you know, $82 billion in cash in a bank, right? You, you guys should have $82 billion in cash in a bank. Well, there is no bank that allows

• 17:04Speaker 03

  you to do that. This cash would stay in the balance sheet of the bank. And the case, and the most important thing is that in a case of a bankruptcy, this cash would be dragged into the bankruptcy proceeding. Instead, if you use USDT bills, if you use, that are basically securities, if you use reverse repos and so on, if there is any issue with the bank, you know, these assets are returned to the owner. And so that would be in our case, returned to Tether, even in the worst case scenario. So, and that I think, that is the, I think some of our competitors found this the hard way, right? They kept uninsured

• 17:45Speaker 03

  cash in the bank, it ended up in the, in the balance sheet of the bank. And when the blank bank blew up, they had, they needed the FDIC to save the bank for the first time in history. They have to save the bank and provide all the Capital to fill the hole, otherwise there would be a massive issue on such stablecoins. And so these are the things that, believe it or not, our team is insanely focused on. And, you know, we were not found in that mistake. We, we, we, we were, you know, we, I would say, being Italians with Mel problems like one miles away, probably, you know.

• 18:27Speaker 03

  So, but really, I'm really proud of the work that we have been doing there in this extremely turbulent period.

• 18:40Anthony Pompliano?

  Now FDIC insurance is really interesting in this scenario because basically what you're highlighting is there's FDIC insurance up to the $250,000 limit. And so obviously that gives the average consumer some degree of peace of mind. FDIC insurance obviously wouldn't save a business or an individual with more than that unless they step in with extreme measures as they did. And so one of the questions that people always ask me is, you know, will Tether get FDIC insurance? And what you're really highlighting here is that FDIC insurance doesn't really mean anything for Tether because there's so much money that either you would have to put the money cash in a bank. You may have too much for one single bank to do that. And so actually the thing that guarantees or at least increases the probability of people getting the money back, right?

• 19:22Anthony Pompliano?

  That the kind of the reserves is the T-bills are a much better solution for that than having to rely on FDIC insurance. Am I understanding that correctly?

• 19:31Speaker 03

  Yes, I mean, the fact that FDIC decided to save Silicon Valley Bank was one, maybe one in a lifetime event, right? So till, like, I think the issue happened on a Thursday and until Sunday, no one knew if that would happen. I mean, it never happened. So, you know, it could happen or it could not. So for a stablecoin relying on insurance on the bank balance sheet is not an option. The option, the solution for a stablecoin insurer is to use short-term US treasury bills.

• 20:14Speaker 03

  And also products like and solutions like overnight reverse repos, fully collateralized in US T-bills, so that you need to redeem $10 billion overnight, you have the liquidity, no problem, right? So that is the type of information, that is the type of knowledge that we accrued over time and that makes me, myself, our team confident. And, you know, we proved, we were really tried by fire in being subject to FAD redemption. I think in one single, we processed one single redemption was $700 million, one single redemption.

• 20:56Speaker 03

  So I think it speaks highly about, you know, our procedures.

• 21:02Anthony Pompliano?

  So one of the big pieces here is when you're putting the money into T-bills, even if they're short-term T-bills, you can generate a lot of revenue. And in Q1, Tether reported, I think it was like almost $1.5 billion of net profit. In Q2, I think the number ended up being somewhere around $850 million. And so let's put it at, you know, $2 to $2.5 billion of profit in the first half of this year. Is that something that you think is just solely tied to interest rates and we're in a high interest rate environment, so that's good for Tether? And when those rates come down, we should expect profit to come down? Or are there other things that you all can do from a treasury management standpoint that one, continue to secure the treasury reserves, but also two, can help to drive

• 21:46Anthony Pompliano?

  revenue and profit for the business, even if rates were to come down in the future?

• 21:49Speaker 03

  Well, first of all, Tether is actually, everyone knows Tether for the stablecoin USDT, right? So, but the reality of things is that Tether is expanding quickly in different areas. So the role of Tether is to ensure that the stablecoin is secure. It has, in this moment, we have, the market cap of Tether is $83 billion and the Tether has more than $3.3 billion in additional reserves accrued in the last few quarters.

• 22:26Speaker 03

  And this quarter will be a good quarter again and so on and so forth, right? As you said, we are living in a high interest rate period. And so we expect that to continue a little bit, but not forever, right? And also means that if this, the high interest rate period would continue for a long time, that would be not good for the global economy, right? You would expect eventually to calm down a little bit. So the stablecoin, I think the profitability of the stablecoin will go down. I must say that Tether maintain always a lean team for even when interest rates were at,

• 23:10Speaker 03

  were really low, you know, at some point, I think Tether was making around 15 basis points on, 20 basis points on average on its portfolio, yet Tether was profitable. One of the other things that Tether has been doing compared to the other stablecoins, and that is actually one of the things that regulators are interested in and are happy with, is the fact that Tether has, the fact that Tether has 10 basis points issuance and redemption fees, allow Tether to remain profitable, Tether USDT to remain profitable only, also, sorry,

• 23:52Speaker 03

  in doing low interest rate periods. And so Tether is this stablecoin Bitcoin, the profitability goes up and down based on interest rates. The good thing is that with the capital that we are accruing, the vast majority is capped at the, to farther back. The stablecoin right now, it's around 104%, the, so 4% of our collateralization. And, but with part of the profits, Tether is expanding different business lines. We are, we started working in energy production and Bitcoin mining. We launched.

• 24:35Speaker 03

  In partnership with Hole Punch, a peer-to-peer communication platform that developed Keet as a peer-to-peer video conferencing and video call and audio and chat tool. We are really excited about that. A new version of Keet Mobile will come in the next two, three weeks. It will be insanely better. It will be much more scalable, super secure still and so on. So, and we are working on other products. And so I think Tether as a company will grow its profitability over time. The stablecoin part will be maybe in certain periods extremely profitable, in other periods

• 25:17Speaker 03

  less profitable, but it's okay, right? So when we launched Tether, we couldn't, we couldn't believe this, this fast growth anyway.

• 25:26Anthony Pompliano?

  Yeah. Is it something where you would ever consider taking the company public or kind of going a more traditional path, given, you know, I'm assuming investors knock on the door all the time when you are reporting $2 billion worth of profits in the first half of a year? That's something where whether they're private investors or public investors, they want to get exposure to profits of that size. How have you thought about the maturation of Tether, you know, kind of the, the holding company, if you will, as a business? And what are the plans there?

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• 26:56Speaker 03

  So we discussed a few times about the opportunity. I mean, we are not shutting the door to potentially bring in Tether public. But I must say that, you know, I'm sorry about that, but I'm always going back to the my Italian roots and Giancarlo, my business partner roots. You know, we come from Italy, right? And there is a huge company called Ferrero, the one that makes Nutella. It is a private company. I mean, the business is thriving. They are doing great and they are not interested to bring the company public. I think if you love what you're doing, if you are excited, if you have long term plans. I mean, if you are an investor of the company, but you, you know, you really are married to that,

• 27:42Speaker 03

  to that vision, I think it's kind of hard to bring it public. That's at least our feeling this moment.

• 27:49Anthony Pompliano?

  Yeah, that makes sense. As part of the reserves, another question that I get is obviously having the T bills and kind of what I'll consider other traditional safe capital allocation that any large institution would pursue makes sense. But what about putting things like Bitcoin as part of the treasury reserves? And, you know, have you guys done that? Is that something that you think is beneficial? Or potentially, you know, kind of violates the treasury management strategy that you guys have in place right now?

• 28:20Speaker 03

  A great question. It's the information that is publicly available. Tether in its portfolio has around 1.5 billion in Bitcoin.

• 28:31Speaker 03

  Given that Tether has more than 3.3 billion in excess equity, that is, you know, company profits non distributed. If even if Bitcoin would go to zero, Tether would still have more money than, you know, all the total issued tokens. Also, Tether holds gold as part of its reserves. We think that the world is extremely unpredictable and Tether users should be protected from edge cases. What we are looking at is that European banks, but I was reading that also probably in the US is even the banks are allowed to put up to 5% of the capital in Bitcoin.

• 29:15Speaker 03

  In the bank balance sheet in Bitcoin. So we have our ratio is around 1.5% on the Bitcoin side. And again, it's smaller than our company excess equity. But yeah, we are thinking about, you know, with really small portions of the portfolio. We are thinking about, you know, some small diversification to give a little bit of counterbalance to the enormous exposure that we have with USD bills. We made a calculation right now, I think, with give or take last numbers is around 72.5 billion in USD bills that would put Tether to be the 20, if Tether was a country, would put Tether

• 29:57Speaker 03

  to be the 22nd country in the world for how many T bills we have in our reserves. And so that is of course a big number and we are of course excited. We couldn't not believe that to be ending this situation, but also you makes you think that at some point you have, you need a little bit of diversification. And I think our risk management over time proved to be correct in its strategy.

• 30:30Anthony Pompliano?

  Yeah, that makes sense. Obviously, people always want to talk about audits and it's this weird thing where you all are doing public kind of maybe transparent view of what's in the reserves. Then there is like a CPA or an actual auditor type thing. There's also attestations. Talk a little bit about like, what have you guys done in the past? And then how are you all thinking about now, you know, giving as much information to people who hold Tether as to where, you know, the funds are in the reserves?

• 31:00Speaker 03

  Sure. So in this moment, 2023, the industry standard, the stablecoin industry standard is the attestation. Attestations are not third party attestations. Attestations are not audits, but they are also a good instrument to evaluate the composition of the reserves of a stablecoin. That doesn't mean that Tether is not interested to perform a full audit. Actually, you know, in the past, we went public saying that we were working on audit. And it's taken a long time for different reasons.

• 31:40Speaker 03

  So, you know, initially, definitely adverse media didn't help. I think that in the last few years, Tether made wonderful progress in providing transparency, providing reassurance. We have seen these black swan events that almost kill our competitors, killed good parts of the crypto industry that didn't touch Tether at all, given, you know, its good risk management and stability. Nevertheless, we are after FTX. You cannot believe how many auditors are, you know, scared about, you know, touching the crypto industry with a ten-foot ball.

• 32:20Speaker 03

  Some of them are not taking on new contracts for auditing. And if you look at the big four auditing firms, my understanding is that there was a public message from someone notable in the Congress that suggested that auditors should not take new customers, new crypto customers as customers. And so, you know, I, to me, it's really important to express the fact that Tether wants always to improve its transparency, has done a tremendous job in doing that. It was the first stablecoin to provide the breakdown of reserves.

• 33:05Speaker 03

  If you look at the attestation of Tether, if you look at the notes that BDO, that is a top five, the top fifth auditor in the world, is doing these attestations, the process, the level of details that they go through for the attestation is really high, is almost comparable to an audit. And if you look at the other attestations, I mean, they are much lesser, like, okay, yeah, we see that couple of numbers, that's fine. So, you know. Also, the our BDO is interested, so is doing the attestation work. But at the same time, wants to make sure that everything is is is proper.

• 33:48Speaker 03

  And so they are doing a really thorough work in the in the for the station. So I I think in the future, the future will still see Tether. And we are actually actually be working towards not it. And, you know, in the past, we made the mistake of of giving some deadlines that we could not meet. We are that that didn't and doesn't change our focus, our commitment. So I'm I'm positive that and, you know, that our team will continue in that direction.

• 34:21Anthony Pompliano?

  That that makes sense. Let's talk a little bit in terms of Tether's growth and many stable coins growth, but Tether specifically. I think people look at and they're like, oh, I think of the asset. But there's underlying technology to this asset. And one of the stories that I think is a narrative violation is that Tether on Tron and Tether on Binance Smart Chain have become much more popular than people realize until they look at the data. And part of that, I think, is people want low cost, fast transactions. But there may be other reasons as well. And so how do you think about Tether on various blockchains?

• 35:01Anthony Pompliano?

  And the popularity of maybe some of the blockchains that people wouldn't expect being the choice for users around the world?

• 35:09Speaker 03

  Well, the this topic is also pretty recent in a way, in a sense that unfortunately, recently, Tether had to announce the the commissioning of Omni Layer. That was the first, let's say, layer on top Bitcoin that Tether used to issue USDT. Is is a bit, I'm a bit sad, because of course, that was our first love and also was Bitcoin based.

• 35:40Speaker 03

  Nevertheless, Tether has a higher commitment to ensuring that.

• 35:46Speaker 03

  If Tether maintains the usage of a blockchain, it is because that blockchain has a threshold of usage, right? You don't want to support one under blockchains and have like, you know, 95% of them with couple of transactions per day or per month, because that would, supporting blockchains, add to the complexity of management of Tether from the technological point of view. And if there is no actual reason, it's not, there is no transfer volume and so on, it becomes more, you know, useless complexity. And so, Tether started from Omni, and then added Ethereum, and then added Tron.

• 36:31Speaker 03

  The, the, the thing is that Tron, as you hinted, has really low, or had, especially in the past, really low transaction fees. If you go in Africa, if you go in South America, no one wants to touch Ethereum with a 10-foot pole. I mean, what, you know, transaction fees that, for a European person on Ethereum, that are really high. But in, especially in emerging markets, developing countries, they are insanely high. And so, of course, now you have all these layer twos, you have Arbitrum, you have Optimism, and so on. They're trying to be more efficient. They try to take down the cost of fees. But the reality is that Tron

• 37:14Speaker 03

  has been super simple to integrate for many. It's basically a turnkey solution. And again, we have always to think about the, the purpose. So, if you want money that will resist to the wrath of God and to an apocalypse, that is Bitcoin. But Tether is issued by a centralized issuer. So blockchains are a transport layer for Tether, right? So they are a secondary market and a transport layer and so on. So in the end, even if one transport layer is more decentralized than another, it's cool.

• 37:58Speaker 03

  It matters, but matters till a certain extent, right? Eventually, there is still the same issuer behind all the implementations. And so people just choose, it's a commodity, right? For Tether, for USDT, a blockchain. And so people will choose the one that will make them save more money.

• 38:19Anthony Pompliano?

  That makes sense. When you think about Tether and its impact in the crypto market, what would happen if Tether went away? Like, one of the things that I always think about is just whether it was regulatory kind of action, whether it was some sort of technological failure, whether it was you guys just say, hey, this was fun. We're going to shut it all down and, you know, go home. It could be a whole bunch of different reasons. Some of them could be, you know, decisions you guys made. Some of them could be external things. But is it something where now Tether has become almost, you know, like it's too big to fail within the kind of Bitcoin and crypto market? Or do you think that, like many things in the industry, you know, things come and go? And if Tether for some reason was to go away tomorrow, the industry would still be okay?

• 39:05Speaker 03

  Look, I think that if Tether would go away would be, you know, I like to think that eventually the world will move towards, and I believe in the hyper Bitcoinization. So, you know, if the world will go towards, you know, more and more adoption of Bitcoin, I think it's fine for Tether to decrease and to potentially, so Tether USDT to decrease and go away. There are other products like XLT or other things that we are doing, right? So. We are, I mean, we are not that the type of guys in saying, well, we have to do everything that we can to make sure that, you know, Tether will be used in from a year to the

• 39:50Speaker 03

  next 2,000 years. That doesn't make any sense for us, right? So if the world doesn't need any more stablecoin technology, that's fine, means that the world is evolving, the world is going towards other directions. And so I think that Tether will always try to innovate and create cool stuff, you know, communication, energy, Bitcoin mining, all kinds of things. And Tether just want to be at service of the industry. If there is no need for Tether, USDT in the future, I think will be an organic decline. And I don't think Bitcoin will be affected. They probably, if, if, that will, that will happen when more and more people

• 40:34Speaker 03

  will finally understand Bitcoin.

• 40:38Anthony Pompliano?

  That makes sense. Another thing that's interesting about stablecoins today is, stablecoins seem to have risen in popularity mainly because banks and large central banks or large financial institutions haven't embraced blockchain technologies. They've talked about it, there's been research, there has been maybe some experimentation, but ultimately, the rise of stablecoins and especially the profits that you all are driving internally, etc., is going to get the attention of these organizations. And so you mentioned earlier, PayPal is now launching kind of a dollar-backed stablecoin. You would think that other organizations are going to follow suit. And whether they actually launch a stablecoin, or maybe they just become friendlier to stablecoins and kind of the crypto industry, what is the

• 41:20Anthony Pompliano?

  impact on the existing stablecoins? Is it something where more people being involved in whether it's competition or friendliness than that, you know, all boats rise together? Or do you think actually there's a world where the big banks could come in and use regulatory capture or something else to potentially get a leg up on and steal market share from whether it's Tether, USDC, or others?

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• 42:40Speaker 03

  So that's a great question and in a way it's like playing 5D chess game, right? So the way I think to it is that there are different models, right? There are the CBDCs, so central bank digital currencies. There are banks, not necessarily central banks, like the super big banks in the world that could work together to create their own stable coins. I mean, in this moment, I'm hearing a lot of small banks that want to create their own stable coin. But I don't believe that is a good solution or is a solution that will last or will be practical.

• 43:23Speaker 03

  Imagine that you have 50 banks that are doing their own US dollar stable coin. I mean, what is the exchange rate one-to-one? You know, which transfer layer? There will be curve pools or like whatever in order to exchange them? I mean, it's gonna be from a user experience, not much from the financial side, but the user experience will be a mess, right? So in the end, people will always pivot for one or two solutions, three, four solutions, but not 50, right? So then, so there is the layer of small banks that trying, they are trying to capture the flag before the big banks are getting there because the small banks probably will can have the ability to move faster.

• 44:05Speaker 03

  Then the big banks could all sit together and work towards a solution that is shared, right? Because if they don't share a solution, they will fight each other in eternity, and that will not work either, because, you know, if, I'm pretty sure that even every big bank would like to have dominance on a stablecoin. Yet, if, that is a factor that probably is in common with all the big banks, and so they will still end up in fighting each other. And so the only solution is that they sit all together, at least try to create a monopoly, and then issue a stablecoin that they all recognize. That could actually work, and that could be one of the most probable outcomes.

• 44:51Speaker 03

  Then there is, and then there is the CBDCs, so central bank digital currencies. I think that, especially in the Western world, that is a little bit trickier to, for a government to issue a CBDC. We are seeing in the US, people in Congress fight against the concept of a CBDC. There are a ton of issues, from the Orvalian future to the fact that CBDCs would replace cash, but cash doesn't pay any positive interest or, you know, negative interest. And the issue is that, of course, cash is still subject to inflation, that is in a way is negative

• 45:32Speaker 03

  interest, but nevertheless, imagine what happens if tomorrow the US would have a CBDC, and they decide to put negative interest on the CBDC. I think there will be a revolt in the right in the country. So it's really difficult for a central bank to have, to really play this with, you know, with understanding all the variables. And what if a CBDC wouldn't be successful? Where are all the banks going? I mean, they will, all the transactional fees of the banks will completely be wiped out, and many banks could go belly up, and a ton of people in the streets without jobs. So it's really difficult for a central bank to decide. So.

• 46:14Speaker 03

  Then we go back to big banks deciding to create a monopoly token, a stablecoin. But also, you know, I think is important that people like also the ability to move money through blockchains and jump across bridges and so on. So if these big banks would not allow this factor, then probably their product would be less used in emerging markets or in the more sophisticated tech industry and so on and so forth. So I think is fairly unpredictable.

• 46:57Speaker 03

  I think Tether is still in great position to keep innovating in this sector and keep moving faster than the others, especially when it comes to banks.

• 47:09Anthony Pompliano?

  My last question for you is about Tether the business itself. How big is it? Is it a distributed company? How do you guys operate the business internally? I think people are fascinated with just the scale of how quickly this has grown over nine years and you're coming up on the ninth year anniversary now. How do you think about it from just a pure entrepreneurship standpoint? And you know, what does the employee size look like and how do you manage it on a day to day basis?

• 47:33Speaker 03

  So Tether personnel size is around 60 people now. That could make it the most profitable company per capita in the world, I guess. But nevertheless, we have been hiring a lot in the last two years and we are going to keep hiring in the next several months because we are expanding the business lines, we are expanding the products. Both on the stablecoin side, we have a couple of, I think, brilliant ideas that I can share, but I'm super excited about them. And also we are expanding other areas like energy production, bitcoin mining, communication and so on.

• 48:18Speaker 03

  So the growth, the size of Tether will be, of the personnel will increase quite fast.

• 48:27Speaker 03

  Also, we are working on educational projects, you know, cross, you know, you know, not related to crypto, but also I'm really, we are, we are big believers on the fact that the future, the informatization of education is one of the key points of the growth of the money in the, in the, in the future. And so we are investing also on that part. So right now, you can imagine that among this, you know, 60 plus people, most of them are basically finance, right? So, but they will, they will move, we will move away, well, not move away, we will move

• 49:05Speaker 03

  towards a more diverse or more complex organization in the next months. We have big announcement coming up.

• 49:18Anthony Pompliano?

  Awesome. Well, I appreciate you taking the time to do this. Where can we send people to find you on the internet or learn more about Tether?

• 49:24Speaker 03

  They can follow Tether, at Tether underscore T O on Twitter or at Paolo Ardoino on Twitter as well.

• 49:36Anthony Pompliano?

  Awesome. Paolo, thank you so much for taking the time to do it. We'll definitely do it again in the future.

• 49:40Speaker 03

  Thank you very much, Anthony.