Paolo Ardoino (Tether) on stablecoin bills, pursuing an audit, and getting to 400m users (EP.606)

Thank you for having me, Nick. It's a big pleasure. So, there's so much to talk about. I don't even know where to start. Yesterday Trump spoke at the Digital Asset Summit or I don't know, DAS in New York. And he said, quote, dollar-backed stablecoins will help expand the dominance of the dollar for many years to come. It'll be at the top and that's where we want to keep it. It also came out yesterday you tweeted Tether is the seventh largest sovereign buyer of US Treasuries in 2024 with 33 billion in purchases. How are you feeling generally about where Tether is today and the political environment in DC?

All right, there is a lot to unpack there. So, I want to point out yesterday my tweet was too short. But if you take the image that you posted yesterday and you look at the first three, the top three were Cayman, Luxembourg, and then you had UK, I think fifth or sixth. But Cayman and Luxembourg, they host a lot of hedge funds. So, when you see those numbers, you actually need to discount the fragmentation of the different hedge funds. So, I believe that actually if you were looking at real numbers, Tether would be top three buyer of US Treasuries in 2024. And on the rear end you could see China and Japan. For different reasons they have been selling US Treasuries. Japan of course needs to support their national currency that is not doing very very well. And China, I think there is a clear interest in dedollarization in the world and selling T-bills potentially is being used as a financial weapon. They have still I think 770 billion dollars to go in US Treasuries. So, I think when I also went in DC recently, I made this point a very important part of my discussion. I believe that there is going to be — and I'm pretty proud because I created this term — everyone knows about the DeepSeek moment for artificial intelligence. That was a clear, I think it's beautiful to use that analogy because we saw how Trump announced $500 billion dollars of investment in artificial intelligence infrastructure one day and then very next day China came out with DeepSeek. And so clearly they didn't finish the V1 the next day. Very timely. But I think they had it in the pocket and they decided to announce it in this very specific moment. So, what I think is going to happen is potentially a DeepSeek moment for the US dollar hegemony. And that I think is what we should be prepared for.

And so, when Tether builds and built for the last 10 years the biggest distribution network for the US dollar — physical distribution network and digital distribution network — we can enter in the details later about that. But when we did that and why we are doing it, when we are in Africa, when we are in Central South America, in these places, most of the time there is Tether and then there is China, right? So, the Chinese are building highways, schools, hospitals, stadiums. There is no US presence in Africa. There is almost no US presence in Central South America. There is a lot of China. And so, there is definitely I think the will from the BRICS countries to build infrastructure, physical infrastructure, and then eventually launch an attack on the US dollar, a more heavy attack on the US dollar to dedollarize the world. And I think that is going to happen. First the BRICS countries tried to create a digital currency backed by a bunch of national currencies. I think they quickly realized that it was not possible because they don't trust each other with their national currencies. But then what they realized is that many people would like a digital currency backed by gold. So, if you see the gold price today and what happened in the last period, and the clear information that everyone has of China and India and other national central banks buying lots of gold, I think that they are preparing for that. They are preparing for a gold-backed stablecoin run by the BRICS. Let me know if I'm saying the quiet part aloud, but I think it will happen by 2025 or 2026. So, when I'm in DC and I'm explaining what we are doing as Tether and why we have the fact that we have 400 million people using our product and effectively using US dollar, we are buying back the T-bills and all that, then I basically what I'm also saying is that it's not easy for us, right? So, we are a simple company. We are building this distribution network. And to us, the importance of the stablecoin bill is not simply about making a regulation on a new technology. It is in my opinion a matter of national security and that's how it should be treated.

And there is a huge difference — and the other part of that I explained is that there is a huge difference about — rightfully so, lawmakers in the US are looking at stablecoins as something that should be used domestically, right? They are mainly, their first interest is regulating stablecoins on the US soil because of customer protection and all that. That is completely fine. But I think it's not correct to think that the same product that works in the US where you have high competition through all the possible payment means will work outside the US in Africa, in Central South America and so on. So, there has to be a concept of a foreign stablecoin that operates mostly internationally that can sure be accessed on the secondary markets everywhere, but does not issue to US people because it's focusing on all the emerging markets. And also a domestic stablecoin that focuses on the US market because that is mostly institutional and focused, and will also focus on servicing or competing with PayPal and Zelle and Cash App of the world, right? So, that is the message that I'm trying to give and explain. I think in general it works. It is working because people understand the importance now of stablecoins. Without the data points that we have, it's very hard to understand the importance of stablecoins, not only USDT, but USDT is the biggest one out there in the emerging markets to fight in the streets, right? So, we never talk to any institution outside the US. We don't go to institutions in Brazil. We don't go into institutions in Central Asia. But we go in the streets, right? We build our adoption from the ground up. We knock door by door almost. That's how we build these crazy crazy numbers.

So, I think the Senate bill is quite interesting. I think it captures the importance of stablecoins that operate internationally that are very much anyway under US scrutiny and will remain under US scrutiny because they would need, based on this bill, to abide to US law enforcement requests and regulations. So, that I think is very important. We follow US laws and regulations when it comes to freezing. I think we are the only stablecoin, including the US stablecoins, that onboarded the FBI, US Secret Services. We work with the DOJ almost daily and the Treasury. And on the other side it allows for domestic stablecoins that are thought to basically focus on the US markets. And it makes sense. On the House bill, that is still I think a draft discussion, I'm a little bit less familiar, but I think that the Senate bill is moving fast and I think is very well thought.

That's a very good question. So, I think that Tether International and international stablecoins should remain international just because it is not suited to be a competitor to PayPal, for example. But definitely, given — and we are going to watch the bill for the requirements for US domestic stablecoins — and we would be open to create a domestic stablecoin in the US because I believe that we have the best technology also for the US. But it would be clearly a different business model. And so, we would need to do a bit of research and understand how we can play in the US, that is a market that we never played in. And that is very exciting. But nevertheless, both the international stablecoin and the domestic stablecoin would go through a full audit. That's why we hired this new CFO that you mentioned. Simon has incredible experience. He went through multiple contentious full audits. I mean, the Tether one should not be contentious. I mean, our balance sheet is very easy. Nevertheless, when you have Senator Warren and Operation Chokepoint 2.0 and Big Four auditors are discouraged to take on crypto customers, that's not easy. I would call that contentious. So, now I think we are in a good place. I think the audit will remain top of our priority list. But now with the change of administration in the US, that change demonstrated and signaled to the Big Four auditing firms that it is okay to work with crypto firms. And so, we are already seeing that change with much more openness towards us.

Yeah. And by the way, thank you for everything that you have been doing to highlight Operation Chokepoint 2.0 because definitely that was a well-thought attack to an entire industry, right? As you said, it was not just for the banks and the correspondent banks, but was an entire attack from multiple angles. So, it was very hard to combat for companies in an industry like the crypto industry. So, yeah. I think we are seeing a change. We are seeing a shift because also most of the Big Four auditing firms, the leading team is in the US, right? So, if you have an administration in the US that tells you you should not deal with crypto, then it's very hard to change their minds. But something is moving and I'm very pleased to see that.

Yeah, El Salvador is a great place. First of all, it is a beautiful country run by a president and a government that demonstrated their ability to push change and make the country probably now one of the best countries in South Central America to live in. It is definitely the safest country in Central and South America, while it was actually — well, it is the safest country in the Americas — while it was the murder capital of the world. So, on top of that, they have been supporting Bitcoin really early on since 2021. We went through all the process there and helped with Bitcoin support. But also, they are the first country that started to support and understand very well digital assets in general and broader. And also, they created a digital asset law that is very thorough but well thought. And also, they added recently, well, a year and a half ago, they added a stablecoin law. By the way, they are the first country creating a very thorough and sensible stablecoin law. It's much better than MiCA. I've been very vocal against MiCA just because I believe that it's going to create systemic risks in European banks because the MiCA for a big stablecoin like Tether would force 60% of reserves into initial cash deposits. I think it's a very bad idea. We saw what happened with a competitor that had some money in Silicon Valley Bank that was in an initial cash deposit. Imagine having 60% of that. And one of the things that I'm trying to advocate for is to have stronger requirements when it comes to US Treasuries or anyway in Europe one requirement could have been to pick the top four economies and buy government bonds from those top four economies. That would have made sense. But actually, keeping 60% in an initial cash deposit is a very bad idea. And on top of that, a couple days ago I saw their press release about their interest in doing the digital euro. Sorry if I'm sidetracking here, but clearly, Europe — in that press release they said that the digital euro for them is a way to prevent foreign stablecoins, foreign currency stablecoins to eat up the market for euro. And you know, my opinion, the euro as a currency is dying and not because of USDT. It's dying because in Europe doing business is almost impossible. And the GDP of Europe was cut in half compared to 20 years ago compared to the US economy. So, long story short, El Salvador is the first country that has sensible stablecoin legislation. All the other places, either you have Europe that is, as I said, I ranted five minutes about it, or you have sandboxes in other places, but sandbox is not helpful for Tether given the size.

Yeah, definitely, we are hiring people there. We have our headquarters. We are renting out an office, but we are building a tower. I think to us it makes sense. Like, some people ask me, why not the US, right? But again, we work in emerging markets, developing countries. So, El Salvador for us is the door to Central South America. When we design the working model of USDT, we designed based on the personal family stories of our employees. We have people coming from 60 different countries now. And each of these people have different problems — they saw different problems in their countries with their families. So, that is exactly how we designed USDT. So, for us it does not make any sense to be on Wall Street. We should be in the trenches with our own people.

Yes, I think we had our chief economist, Philip Gradwell, who was at Chainalysis first. Now he came to us. He published a couple of months ago the first analysis on how we calculate the number of users. So, there is a very high activity on blockchains across all the different blockchains and bridges. And of course, we also count addresses that receive some USDT and then they keep it for 24 hours and send it. So, not every single address has to have USDT all the time, but they need to have USDT most of the time, right? Or at least a certain number of times per month. Plus, we have good contacts with many centralized exchanges. Unfortunately, non-custodial holding of crypto is still not very popular. I believe that we should work hard to improve that, just for multiple reasons — reduced trust on exchanges, a bit more responsibility. But the most of the reason why people don't do that is because UX sucks. So, we want to try to change that. We might be able to prove this change in the next year or so. We are going to launch a few products around this concept. But, going back, there is still an enormous amount of people that use USDT only on exchanges. They don't want to hear what is a blockchain, they don't care what is a blockchain. If they want to use peer-to-peer trading on Binance and some other exchanges, they just want to — if you are in Buenos Aires, you just have Binance Pay or Bitfinex Pay, you accept the payment, it goes to your account, and you pay another person in Bitfinex or Binance through that system in your account. There is no blockchain transaction or anything. But, when we inquire the different centralized exchanges, we get incredible numbers in terms of user base of Tether. So, it's a mix of a lot of on-chain activity, but also a huge amount of USDT per minute on almost entirely all the different cryptocurrency exchanges. Plus, you have to sum all the different smaller exchanges that are very local, like the Turkish ones, the Argentinian ones, and all that. So, we try to collect all the information from many sources, and we discount the number a lot because we assume there is a lot of overlapping between different exchanges.