Tether’s USDT Has Uses Beyond Crypto Markets, Trading: CEO Paolo Ardoino

As a researcher with extensive experience in the digital currency landscape, I have always been intrigued by the evolution of stablecoins and their impact on the global financial system. The interview between Bullish CEO Tom Farley and Tether’s CEO Paolo Ardoino sheds light on some fascinating insights about USDT, a topic that has long captured my attention.

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In a recent interview with Tom Farley, CEO of Bullish, Tether’s USDT founder, Paolo Ardoino, highlighted that while USDT initially emerged as a cryptocurrency, it has since grown to become the world’s most widely used digital representation of the U.S. dollar.

Bullish is the owner of CoinDesk and a significant holder of USDT.

In simpler terms, Stablecoins serve as a foundation for crypto trading because their value is tied to real-world assets. This means they offer a way to keep money secure within the cryptocurrency market without having to worry about the ups and downs of cryptocurrencies like Bitcoin (BTC). Many Stablecoins are directly linked to the U.S. dollar, although some represent other currencies and assets such as gold.

Beyond just cryptocurrency trading, Ardoino pointed out, USDT serves a crucial role. In nations like Argentina and Turkey, it offers a vital lifeline as a substitute for unstable local currencies. Prior to the widespread use of USDT, people in countries plagued by inflation often had to turn to the black market for dollars.

USDT works better internationally as the U.S. has multiple ways to handle the dollar, but some might question why use a dollar at all.

USDT, being the largest stablecoin, boasts a market cap nearly equal to $120 billion. Remarkably, it ranks as the third-largest cryptocurrency overall, outpaced only by bitcoin (BTC) and ether (ETH). Furthermore, its size significantly exceeds that of its closest competitor, USDC, issued by Circle, which stands at approximately $35.6 billion – a difference more than tripled in scale.

Approximately 61 billion units of USDT (Tether) are circulating on the Tron blockchain, while around 54.3 billion are found on Ethereum. This distribution is primarily due to the fact that it’s less expensive to execute transactions on the Tron network, as stated by Ardoino.

Based on data from Etherscan, the typical cost of gas fees for a straightforward exchange on Ethereum averages approximately $14.60. However, on Tron, these costs are substantially lower, around 20 cents.

He pointed out the challenge of a person living in Haiti, earning just $1.34 daily, affording transaction fees of $5. He emphasized that such transaction costs are too high for these markets to bear, whether it’s Ethereum or any other platform.

Ardoino further delved into another aspect where stablecoins and geopolitics connect: Treasury bills. These financial instruments serve as backing for the cryptocurrency, allowing USDT holders to quickly convert their assets into dollars if they choose to withdraw. Concurrently, the earnings from interest payments are accumulated by Tether during this period.

Even as the Chinese government, one of the biggest owners of U.S. federal debt, is gradually reducing its ownership of U.S. Treasury bonds, entities like Tether that issue stablecoins have been aggressively purchasing these bonds instead. This has occurred as the People’s Bank of China has been offloading them, amounting to over $100 billion in total.

If Tether were a sovereign nation, the data suggests that its assets would be comparable to those of Germany, and it would be rapidly approaching the level of South Korea’s holdings.

“We added resiliency to the ownership of the U.S. dollar, so now you don’t have one single country, one single decision maker that can sell hundreds of billions of T-bills at once,” Ardoino said. “USDT and Tether are the best friends for the U.S. dollar.”

Cantor has most of Tether’s reserves

Throughout much of its existence, the nature of Tether’s reserves has remained largely unclear, and rightly so.

Initially, the company faced frequent account closures, making it something of a nomadic entity, requiring it to establish and terminate accounts in various global locations such as Qatar, China, Taiwan, and Canada.

In an effort to clarify the backing of USDT when doubts arose, CoinDesk pursued the disclosure of Tether’s banking connections, which had been obtained by the New York State Attorney General during an investigation. These details were later made public due to a Freedom of Information Law (FOIL) request filed by CoinDesk. However, initially, the NYAG resisted this request for information regarding the reserves; but eventually, a judge overruled their objections. It is worth noting that New York has since banned the stablecoin as part of a settlement agreement.

Presently, the dynamic has shifted, making the connection less complex: Primarily, financial management duties are handled by Cantor Fitzgerald, while the bank’s CEO, Howard Lutnick, frequently endorses the entity responsible for the stablecoin issuance.

According to Ardoino, Lutnick would have an unobstructed view into the assets backing USDT, and Tether follows the same method of providing verification by a major accounting firm, just like other competitors do.

He stated, alluding to those who embrace such speculations about the company’s financial support for USDT, “It might be beneficial for them to seek a change of environment outside their current residence.

The market doesn’t seem to.

A Polymarket contract indicates a 4% likelihood that Tether might face bankruptcy in 2024, whereas the general consensus is that there’s a 9% chance of a nuclear weapon being deployed this year.