Welcome back to Bitcoin Capital. Today we're speaking with Paolo Ardoino, the CEO of Tether and the CTO of Bitfinex and Bitfinex Securities. This week is Bitfinex Securities' 5-year anniversary, so we're taking the opportunity to look at how the RWA and security tokenization industries have developed over that time. Paolo, welcome to the show.
Hey Jesse, thank you for having me.
Of course. So Bitfinex obviously was a pioneer in the Bitcoin trading space. Tether was the first stablecoin, and then 5 years ago you guys had this idea about security tokens and Bitfinex Securities. I think now that looks like a very good idea. Now that we're getting more and more kind of mainstream institutional interest in RWAs and security tokens, but back then 5 years ago it was maybe not such an obvious idea. What was kind of your thinking at that time, and why did you want to go in the direction of tokenizing securities and real world assets?
Yeah, I like to think about the fact that our team is always a path opener for an entire industry. It has done it with the exchange. It has done it with the stablecoin. And I think Bitfinex was the first exchange to recognize the necessity to connect the Bitcoin spirit to the real world, acknowledging that there are plenty of great real world assets. For example, of course real estate, there is land, there are companies that are producing goods, there are companies that are innovating, that are building every single day.
And those companies deserve to be part of the financial system, no matter where they are. That's the beauty of Bitcoin — anywhere you are in the world, even in the most remote village in Africa or South America, you can participate in Bitcoin. What about the rest of the financial world? What about the rest of the capital? Was that true for that? The answer was of course not. If you have a company that lives in an underserved country, then you will never be able to access the same amount of capital that you would get in San Francisco.
And that realization in the Bitcoin spirit was an eye-opener for us. When we had that idea, it was not easy at all. I think I remember there was only Kazakhstan that would offer a pathway to get to and the sandbox to try and test this idea. Now, of course, the world completely changed, and there are many more opportunities, and everyone and their sisters are onto this bandwagon. But yeah, I like to think about the fact that we were really visionaries in predicting the movement.
Yeah, and then 5 years later, we have about half a billion dollars worth of assets on the platform. You know, we've got a very busy second half. I think the rest of the industry is busy as well. There's tens of — I don't exactly know the exact number. I think it's a little bit difficult to pin down, but tens of billions of real-world assets. Next year, there's going to be hundreds of billions, I think. Looking forward, how big do you think the opportunity is for tokenized assets?
So, I think I would divide the opportunity in two parts. The first one that sees the highest level of excitement in this moment is let's bring the capital markets on chain. And that's fine. I think it's a very interesting value proposition, especially because it would force, first of all, all of traditional finance to trade 24/7, which never happened before. It would allow traditional finance to move from very outdated and clunky technological rails onto a 30-year leapfrog into blockchain. That by definition, by all means, is a great technological layer for finance.
But it really doesn't change, in most of the things that I'm seeing today, most of the different opportunities that we see today in tokenized real world assets — it doesn't change the accessibility, the financial inclusion levels that instead I believe an exchange like Bitfinex with Bitfinex Securities is trying to achieve. With Bitfinex Securities we are trying to achieve true financial inclusion when it comes to capital markets, not only from the buy side that basically everyone is focusing on.
So, even there are some narratives where you read that if you tokenize Apple shares, a person in a village in Africa could buy those tokenized Apple shares. Well, it's not exactly like that. The restrictions are exactly the same, doesn't matter the transport layer. But anyway, even if that was true, it would only solve the buy side. The sell side, i.e. the company that is on the other side that is seeking to tokenize, or seeking to raise capital, has in this moment still a very hard time to get in front of the buy side.
In front of users that are completely unaware of the opportunities that these companies could represent because these companies don't have the financial means to go on a huge road show or marketing sprees in the United States or in the Western world. They maybe are hard working in Buenos Aires or hard working in Nairobi. And I think that is what I'm most excited about for Bitfinex Securities — is exactly trying to solve also the sell side, the lesser known company, the lesser hyped company, how that company can put itself in front of a broader user base and international user base that could see the value and participate in the success of the company.
So do you think there's a — I think there's a bit of a trend to be institutional focus. Everybody wants to be institutional quality. Do you think we could be too institutionally focused as an industry when we should be looking at how to expand this thing to, you know, I guess democratizing finance is a bit of a cliche but that's really the goal, right?
Yeah, I mean, most of the companies like to do the simple things. You know, it's easier to spend on marketing and to make your mouth full of good promises rather than actually do the hard execution. We see that in a certain way with Tether versus other stablecoins. You know, Tether built its entire moat with boots on the ground and with hard work, with sweat and fatigue. Everyone else is trying just to have flashy banners on social media.
So, same thing happens with Bitfinex Securities. Sure, we could spend our time to tokenize the two gazillion different stocks present on every single stock market. Great. But, what are we really adding to the world? I don't think that would be in the true spirit of Bitcoin and financial inclusion and accessibility. I think seeking and finding the undiscovered cherries of the world — and that could be interesting, of course, for the user base of Bitfinex. But in general, they don't have the ability to put themselves in front of the buy side — is the mission, right?
So, like a chain of bodegas in South America that is doing fantastically well, that is profitable, and so on, cannot compete in terms of hype with SpaceX. So, but I think Bitfinex Securities should focus much more on these emerging markets opportunities, and find ways to put them in front of people that are very interested to find something alternative to invest in.
Yeah, I think the path is kind of similar to Tether as well, to kind of attack it from the outside in. A lot of people are focused in the major capital centers like London or New York. And I think people often wonder why are you in El Salvador? Why are you in the IFC in Kazakhstan? And kind of attacking this from the periphery in. And that's my understanding of how Tether got big as well, right? It didn't start in the big markets. It kind of started from the outside, and then it got pulled in.
Yeah, I mean, in the end, we are all humans. We need to decide what to do with our lives. I think what we do echoes after our death. And so honestly, I believe that the Bitfinex team and Tether's team — the companies are both very profitable, very well run. And we are not in this business for making another dollar. Of course, we are lucky because we are extremely profitable in both cases, but profits are nothing if you truly cannot bring forward and carry on the mission of Bitcoin, which was proper financial inclusion, ending monopolization of access to funds.
So, I think that's what I like about our teams. Every single day you go on X and you see so many messages of virtue signaling. And sometimes I hear people around us sometimes sending me some of these tweets saying, 'Oh, why are you not doing that? Why not doing this and that and so on?' But the reality is that that is the easiest shiny object to reach, but it would not move the needle. And if you do that, you get completely distracted from what matters truly in this world.
And so, the distraction of trying to seek what is easy and just for the sake of making another cent is not for us. It's not for our team. We don't care. We carry on with our vision. Remember, with USDT, it took 6 years before getting to a meaningful size in terms of market cap. You know, Bitfinex is an exchange that has been there since 14 years. So, you can say everything about our team, but you have to admit that we are relentless and resilient. Just a couple weeks ago, few weeks ago was the 10th anniversary from the Bitfinex app.
And every single event in our history proves our willingness to continue carrying on and build what we believe is the right thing rather than being distracted by the noise that surrounds us.
And so like 5 years ago I would have said, and I think you touched on this about how we ended up in Kazakhstan, is that the regulatory side was probably the biggest challenge over the last 5 years. I think the technology side has gotten more robust. The regulatory side I think is a lot better now. What do you think are the main challenges for tokenization at the moment?
I think — sorry to go back to the same point — but if now everyone talks about tokenization in the context of let's bring Apple stocks on chain, that will distract the regulators from what actually should matter, which is let's create an open playing field and let's create frameworks that of course are safe and protective for the customer, but still would allow also smaller companies that are so efficient given the new technology — that would allow SMEs to get in front of a buy side.
Because otherwise SMEs have to raise capital through very expensive, closed markets like the banks. So, if an SME can only go to a bank in his own local area — imagine you are an SME, you are in the most remote place on earth, you can only go to your local bank branch, there is no competition there, so you will never obtain the optimal price for a loan, for example, to raise debt. You have to be stuck with whatever they offer to you.
I think having global markets also for SMEs that can raise capital or raise debt would allow extreme efficiency and would create much more interest also globally and would not only allow to find new shareholders, but also find more customers even.
Yeah, I wonder if part of the stock focus is because the opportunity is so obvious. If you're a Bitfinex user and you're used to trading Bitcoin and you're used to 24/7 365 trading and you're used to real-time settlement and then you go back to the rest of the world where it's T+1, it's T+2, you know, Taiwan our trading hours are 9:00 a.m. to 1:30 and we don't do weekends, don't do Chinese New Years. So, the opportunity there is maybe so obvious and that's the way the market has to evolve. Maybe that's why so many people are pushing in that direction.
Yes, and I think it is the right thing, by the way, to make a market trade 24/7. All that is great. But, I think it's the low-hanging fruit and basically we are focusing on basically a small spot on an entire elephant. The entire elephant is how we fix the real problem. Then, of course, fixing the real problem is creating these additional benefits of having the entire stock market on chain — great.
But I think if we think about the right mission that exchanges should still try to follow, it is to create more of an open playing field for lesser-known companies. In this moment, if you look at the capital markets, probably 3-4 companies are sucking in the entire liquidity of this world. From SpaceX to OpenAI, Anthropic and similar — they got the entire liquidity of the world. There is no space for anyone else. And so, that's something that should make us reason and think what we can do better.
