Hello and welcome to the Big Bang podcast. I'm your co-host Larry Surma, president of the block and I'm joined by Namk, the chief strategy officer of Megath. Today we have one of the most interesting visionary builders in crypto, Paulo of Tether. Would you like to introduce yourself?
Hey guys, thank you very much for having me. It's always a big pleasure to be hosted by the block. I am Paolo. I am the CEO of Tether. Coming a long way. First senior developer at Bitfinex, CTO at Bitfinex, CTO at Tether, and then CEO at Tether since 2023. I'm a technologist, I'm a nerd, a developer coding for almost all my life. I think 32 years of coding now and I like just to build stuff and do things that others don't do and maybe don't care about. But my entire vision is building technology that resists the wrath of God and that helps the humans in the worst case scenario rather than just building something that can only survive in the best case scenario. That's kind of me in a nutshell.
I remember Paolo and you and I talked the first time Bitfinex, you know, obviously was well, Tether is specifically, but Bitfinex as well. You guys were having some issues. You just issued LEO and now we're here, you know, a few years later and you're probably one of the most profitable companies in the world. Just made $13 billion last year in profit for Tether. And you know, probably one of the most important companies in crypto and maybe even in the world when it comes to what you guys are trying to accomplish. So how do we get from that point where it was kind of one of the lower points of your journey and you know, you starting to become more public to now visiting Wall Street and Washington and you know, so much growth that you guys have seen. How has that been over the last four or five years?
Look, the entire crypto industry was and is still fairly new. I still believe that we are early. Tether created in 2014 this thing called stable coin and for 11 years really no one cared about that and this year suddenly 2025 is named the year of stable coins. The most powerful government in the world is creating law that will regulate the technology that are created. So that's quite exciting. I mean the road to get there has been a little bit bumpy. When you are in a new industry when actually you create a new industry it's not easy to get everything perfect also because you pissed off a lot of people especially in the banking sector. So you know sure we had some roadblocks and bumps along the way but you know when you have to fight with the global traditional financial system it's never easy and I think that the biggest kudos goes to our team because they never back down, they never stop, they never stop believing in the mission of bringing a dollar to hundreds of millions of people that have been left behind by that traditional banking system. And yeah I mean I've been personally going into the United States for me I mean I'm 40 this is the first year for me that I decided to go into the United States before I never had the opportunity and you know it's quite remarkable because the past administration was you know it created this Operation Chokepoint 2.0 and the OCC was very against stable coins and the banks and then was directing banks to be against all the crypto companies and then you had Senator Warren writing letters to all the auditors saying that they shouldn't touch crypto companies with a 10-ft pole and now just in a few months we are seeing a huge positive change at least in the respect of crypto. So and I've been going in the United States and talking to the Hill and to the administration to explain why stable coins are very important but not only for the United States. The way I try to describe it is that the United States are now trying to pass a law on stable coins. That is great. Especially dollar based stable coins because they are really very important but they are much more important outside the United States rather than inside the United States. The simple way I try to describe it is that you can imagine the United States having the financial rails 90% perfect and efficient. So the US has the best financial rails in the world and has the best efficiency of money in the world. So you could say that they are 90% complete. If you add stable coins on top of that, you can get to 95% perfection because you know money will become even faster, more transparent and then you can program money, right? That's great. But it's from 90 to 95%. So you get towards that 99.9% perfection. That is insanely better than anywhere else in the world. If you take Nigeria, you could say that the efficiency of money is 10-20%. So if you add stable coins on top of that, it gets to 50%. So stable coins have much bigger impact outside the United States rather than inside the United States. As simple as that, it's pure math and logic to me. And you know what, on the Hill I'm trying to explain that the regulation should also take a look at and provide proper safeguards for foreign issuers like USDT is a foreign stable coin to the United States but nevertheless it's not less important actually it's more important also for the dollar hegemony and purchasing US treasuries and the depth that we're going probably to talk about later.
Do you see a world in which the US ever issues their own stable coin?
Yeah, look I think that the US tried to or like US lawmakers try to ban the possibility of creating a CBDC. I think that the success of USDT shows that also privately issued stable coins can be very very helpful to the United States. In the end, basically we are using most of the reserves to buy back the US debt, right? So and it's all very transparent as a process. We keep our treasury bills in Cantor Fitzgerald that is a primary dealer, is a US institution. So I think that they can have very strong and deep scrutiny in what we are doing even if we are a private company.
It's really important for the US from the perspective that you just mentioned but also like you said it's really beneficial for countries where maybe inflation is just really difficult. You tweeted something recently where there was a store that's now quoting prices in USDT. What are some examples that you've seen and that someone has shared with you where USDT is just helping people, you know, to get access to normal stable money without being so reliant on the local government and do you think that's just going to become more and more common in the future?
So I mean I wish I could say that USDT has become very successful because we were perfect and beautiful and great but actually it's the insuccess of entire economies that made the success of USDT. That's kind of like just a quick parenthesis but it's kind of almost in a way saddening to think that the success of one of your products is directly proportional to the insuccess of some emerging markets, economies, from a human perspective, I think about this a lot. But on the other side, I think that if there was no USDT, all the populations in these countries would be having a worse time. So if you think about Turkey, where the inflation in Turkey is 50% last year was 50% year-over-year and the Turkish lira lost 80% of its value against the US dollar in the last few years. In Argentina the Argentinian peso lost like 90 plus percent of its value against the US dollar in the last few years and Argentina defaulted multiple times you could see why people are resorting to USDT. You know one of the crazy things because when you run a company where the success of its main product happened organically, if you look at the chart of USDT growth it started growing dramatically from 2020 to 2022 and then 2023 and 24 were huge as well and also this year. But until 2020 when USDT was only used in the crypto market, the usage was good but limited. The growth was you know 4 to 6 billion up to early 2020 maybe 7-8 but that was the cap. Then something happened and again we went back and looked at what happened and trying to learn from the growth of USDT because it was organic so it was not dependent on something we did so it's very important that you try to go in retrospect. So what we learned is that in the emerging markets in developing countries there are a couple of things that are very common one is the high use of smartphones and so even if a country is poor does not mean that necessarily is poorly equipped when it comes to smartphones and connectivity necessarily. And so on the other side you have also lower average age for population. So what we learned and in a way is very touching to me from 2017 to 2020 in the emerging markets is the young kids that learn crypto the fastest and that is fairly normal but all the young populations the young generations are more prone to learn new things. But if in your country there are much more kids than other countries, these kids will become very important for basically the adoption of any new technology. But in 2020 with the advent of the pandemic, these kids were looking at their parents that were losing the jobs and they were trying to protect their families. These parents were trying to do what they could to protect their families in one of the worst moments of the recent history of humanity. And the parents were even with the pandemic, they were still going out in the streets to buy cash dollars in the black market because they have been doing that for the past 20 years. But there was the pandemic. So it became even more dangerous. It was already super inefficient because you know these cash dollars were priced quite higher but still was even more dangerous. So what happened is that the kids for the first time were the kids that were teaching to the parents that they could keep digital dollars on their smartphone without having to leave home and that is what bootstrapped the usage of USDT in all the emerging markets were kids teaching to their parents, kids learning from each other on Discord and then teaching their parents how to use and hold a digital dollar without putting themselves in danger. So that is very humbling to me and is crazy. And we just learned it very recently because again we went back and learned about it.
I'd love to hear your thoughts on Tether Gold and the role it will play in these emerging markets as well. You highlighted the fact that like in a country like Turkey which you know I have a fair share of experience in the country's been riddled with hyperinflation. Crypto has emerged as one really strong alternative as a way of life but a lot of people are asking questions around okay what if we were to revert back to like gold-backed financial systems and I know you guys have Tether Gold as a product in that vertical. I'd love to hear some of the thought processes behind it and what you see as the future for a gold-backed stable coin or gold-backed product of any sort.
So I like to be very pragmatic and logic in everything that we build at Tether in the scale of quality and perfection as a tool or as an asset. The lowest ranking is fiat currencies. Then US dollar is the best fiat currency. Then to me on top of the US dollar there is gold and then on top of everything there is Bitcoin. Right? So to me, gold is the best tokenized asset in the world because for the last 5,000 years, humanity has been using gold as a currency. And you know, gold cannot be inflated. Sure, you can say that if gold price goes to 100k per ounce, then you could try to go to Mars or well, not to Mars, but on an asteroid and trying to mine gold from that asteroid and all that, right? It all depends from incentives. It's almost like game theory, but you could say that I think that the supply of gold will slowly and steadily increase with a small inflation over the next years, but will not double triple in a matter of one year or two years or a decade very easily. I think it's very very improbable. So compared to all the national currencies that are driven by decisions of humans. So the beauty of Bitcoin to me is that is the only currency that is governed by math. Then gold and math is the only certainty in the universe. Then gold is the only currency that is governed by nature and is very hard to change nature even for humans. And then all the rest is like going downhill from there. So we created Tether Gold because that was actually the best product that we could create outside of Bitcoin and if you think about it is a product that could part of our returns on USDT because we cannot make money on gold. But since someone will do it eventually then it's best if we do it rather than let someone else doing it. Also I know for a fact that the BRICS countries have announced that they will issue a digital currency backed by gold. Look at the gold price in the last 3 years like it went more than 2x. So the reason why it happened is because BRICS countries are going to launch a digital currency backed by gold and they are building infrastructure in Africa in Central South America and other parts of Asia. So imagine BRICS countries with this new currency they will have all the people working the infrastructures they built all around the world starting using this digital currency backed by gold that is actually quite a cool currency in a certain sense because it's not the yuan, it's not a Russian ruble, it's backed by gold so it's quite appealing especially in the emerging markets because the emerging markets have the highest attention for gold so in a certain way they decided it's almost like the BRICS decided to compete with the US dollar, not with a basket of their own currencies. I think that they wanted at the beginning, but they realized that that was a bad idea and now they will try to compete with a gold-backed currency. So, it's best if Tether does it and provides an alternative to what the BRICS countries are going to issue in parallel to keep leading on with USDT.
You know, it's interesting. I would argue that you and Tether are the largest exporters of American soft power in the world. Now you're front running a world in which gold ends up being this shared asset in the BRICS markets. So I want to touch on the point I just made around the role of Tether in effectively fleshing out US hegemony around the world. So I think we're in a very interesting geopolitical landscape. We've had an unprecedented 20 years of globalization which was very much pushed by the US but I think we can all agree that there is an end of an era happening right the US is becoming much more isolationist for better or for worse that's a strategic decision while China is actually expanding. I see Tether as one of the like you know you're one of the largest holders of T-bills in the world, but I'm curious to hear how you see the role of Tether in these emerging markets as a way of enforcing western democracy and just like western values.
Very good point. I think that the ultimate social network is money. Tether kind of created three things. Well, created a stable coin and the effect is three-fold. Tether is the company that was able to successfully or at least in part successfully bring financial inclusion to emerging markets. One of the things that annoys me the most is how the hell a small company like Tether was able to do more than NGOs and charities and other organizations that raise a lot of money to bring financial inclusion. I mean if you are beaten by a couple of Italians then you have a big problem. I believe that that has to be said. So financial inclusion to hundreds of millions of people and growing. Second is the fact that we have been expanding the US dollar hegemony and I think that is clear. Tether has millions of physical touch points in the emerging markets. So these touch points vary from chains of bodegas in Central and South America with tens or hundreds of thousands of shops that sell phone credit and all that or like newspapers news stands. Those are great ways to deal with people and interact with people where you can also offer education, you can offer products, any product can be offered through these chains of bodegas. Same in Africa since there is less infrastructure to acquire. We are you know Africa has this problem of low electricity penetration. So around 600 million people out of 1.4 billion people 600 million people have no electricity at home but yet they have smartphones and different equipment. So what we are doing is building kiosks in Africa in small villages with solar panels on top and inside we have rechargeable batteries that we offer with a subscription of three USDT per month and so we are teaching how to open Bitcoin and USDT wallets. Right now we did a pilot in Africa and we have already 500 of these kiosks we have 500,000 people using these batteries and more than 10 million battery swaps. So these kiosks are becoming the center of commerce of the village and with the remittances going through these kiosks then to the wallet installed through these kiosks. I mean that's one of the many ways we work to expand our distribution channel with boots on the ground and by 2026 we plan to have 10,000 kiosks and by end 2030 we plan to have 100,000 kiosks so that we can pretty much power up 30 million households in Africa and that by the way is a change that we will see from space because the center of Africa is very dark but if we light it up you can see it from space. But on top of that we basically are building the biggest distribution network in the world and I completely agree with you Namk that the world is going towards a localization from a globalization right and if you remember like in the past decade or so if you were a company and had a physical distribution network would have told you sell it and rent it back and we did basically the opposite. So actually we built the distribution network so that now you know sorry to say I mean look at the S1 from Circle we don't have to pay for the distribution so we built our own distribution.
And to double click on that Paolo what have you found on the ground in terms of people what do they actually care about is it just access to money and they don't care about any of the rails they just care about hey I can send this to one of my friends and pay him for something what's kind of been the thought process and some of the takeaways that you have from these physical locations that you now have in Africa.
So they really don't care about blockchain. They just care about the fact that the fees are basically zero or almost zero. So we have recommended through our education different wallets and we work with partners and you know honestly we are very agnostic but we realize that the problem is that most of the wallets are trying to sell you something like they will they are trying to oh how nice those dollars are sitting those USDT are sitting on your wallet unused. Why you are not going to use them to buy this thing or that thing or that dog coin or this or that right so is the way is so on a daily basis they are almost like luring the users into spending their USDT and they should keep the USDT as savings and then for the families. So we realize that Tether should build the best user experience for these markets. We are partnering with some companies. I mean we have an ongoing relationship with Opera with the MiniPay. But on the other side we are looking at how Tether is building this platform and open-source SDK called wallet development kit WDK that aims to allow anyone to build wallets very securely, allows very simple smooth user experiences where you can have a checking account for USDT and a savings account that can be Bitcoin but also if you move some USDT into a savings account can do like all the magic of moving them to a yield platform, decentralized yield platform right so checking account savings account couple of things very easy in the wallet nothing too crazy with no tokens no other tokens so on then anyone can configure to add more tokens and I mean it's extensible right so but the way we will distribute it's very simple very vanilla Because you know I also trying to explain to the Bitcoiners like Tether does probably is the company that does most of the Bitcoin education around the world and the problem is that we go there and we explain to everyone how Bitcoin works and then they say well give me USDT and the reason is that they are not everyone is ready yet to make that extra step right so that's also what I tell to the Bitcoiners you cannot pretend that all the people in these markets have all the same amount of time that you have to go nerd and learn about things. It's very obnoxious of you to think about it. And so we have to work hard. We have to do education. You cannot be an armchair Bitcoin maximalist. If you want to do it, do it yourself and you will see. So first you have to bring them on a wallet that takes good care of them that gives them something that they're familiar with and then you can bring them and explain to them new things but you know it's a very very long process and I mean Tether is investing a lot of money into it and you know it's kind of unique I think.
