The Stablecoin King | Tether CEO Paolo Ardoino on GENIUS Act, Circle IPO, Bitcoin & Tether to Trillions
🎬 DEBRIEF | Ryan & David Unpacking the Episode
Paolo:
[0:00] Last year, we made $13.7 billion in profits, and this year, I think we're going to beat that.
Ryan:
[0:05] Wait, $13.7 billion in profits?
Paolo:
[0:08] Yeah, last year. And this year, I think we can do a little bit better.
Ryan:
[0:15] Welcome to Bankless, where we explore the frontier of stablecoin finance. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Guys, there's a Game of Thrones going on right now, a stablecoin war of sorts. Tether is the undisputed number one lead of stablecoins right now. So I guess that makes our next guest, Paolo Ardonio, who's its CEO, the stablecoin king. And I gotta say, for a king, he's pretty unassuming, but he has ambitious plans for the continued distribution and dominance of Tether. And that's going to be important in this new era, an era where we've just seen the Genius Act, the U.S.'s landmark stablecoin bill, just passed the Senate. Looks like that's going to go forward to Trump's desk and it will get signed. So my biggest question going to this episode was, assuming the Genius Act passes,
Ryan:
[1:06] what's Paolo planning to do with USDT and Tether? Is he going for compliance or is he going to launch a new U.S. Domestic stablecoin and bifurcate things? The answer sounded like it was both, but it was also really nuanced and you'll have to listen in to find out and get your take. He also said, and this made David and I almost fall out of our chairs, that Tether made almost $14 billion in profits last year.
Ryan:
[1:33] Okay, that's profits. I did some math after this episode was recorded, and if you take the price-to-earnings ratio of Circle right now, which is trading at pretty heady valuations, and you multiply that by the earnings of Tether, around $14 billion, you turn Tether into a $13.7 trillion company. That'd be the largest company right now that exists, ahead of Microsoft, Apple, NVIDIA, and all of the rest. I'm not sure if Tether is worth that much, but it's certainly gargantuan in scale. He also broke the news that Tether is launching a new product this year. So let's get right into the episode with Paolo. But before we do, I want to thank the sponsors that made this episode possible.
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Paolo:
[5:28] Thank you for having me, guys.
Sponsor Break:
[5:30] I just want to get your first reaction to the passing of the Genius Act. It still has some work left to do. It has to go back to the House. But people are more than cautiously optimistic, I would say. Donald Trump sent out that tweet saying, guys, I just want to approve this thing. House, just get it done. Let's get this done. What was your first reaction to the Genius Act passing in the Senate?
Paolo:
[5:51] For us, as Tether is the creator of the stablecoin industry in 2014, we are very honored that the most powerful country in the world, the most powerful government in the world, is taking good care of a technology or legislating on a technology that we created 11 years ago. So that is very exciting. I think that Genius Act is a step in the right direction. It creates a framework. Well, of course, as you said, it still needs to be passed by a house, but it seems there is a good momentum. So it creates a strong framework for domestic stablecoins, as well as foreign stablecoins like USDT that could find in their ability to meet their requirements through comparable regimes.
Paolo:
[6:34] So we think that Tether, USDT is in the right spot to comply as a foreign insurer. And also, as I announced, I think a couple of months ago now, we are looking at creating a grassroots domestic stablecoin in the United States. So the Genius Act creates a very, very high bar for everyone. That's the thing that I think I like the most, and it's very fair. In a sense that it creates a very high bar when it comes to AML and compliance. Yesterday, there was a huge news of Tether collaborating with the Department of Justice. Tether was able, with its own means, almost one year and a half ago at this point, to identify through its monitoring technology. We built, I think, the most amazing technology for monitoring our secondary markets in the blockchain ecosystem when it comes to stable coins and specific USDT. We were able to identify a big battery scheme and when we did that, we immediately notified the law enforcement, i.e. the DOJ, and they agreed with our analysis. We proceed to the freezing and now basically the DOJ is in the process of receiving this money and working on restitution.
Paolo:
[7:45] So these are great examples of what Tether does. We collaborated with more than 250 law enforcement agencies across more than 55 different countries.
Paolo:
[7:54] There is no financial institution that has these numbers. So we are happy to prove more and more and keep raising the bar. And when I see that those type of requirements in the Genius Act, I'm very content because I think that we are doing that best than anyone else. The requirements of strong financials are also very good. No one wants to have another Terra Luna. Tether has more than $125 billion in treasuries. It's growing over the last, all the data certifications. We have been growing our monetary base in US treasuries. So we are going the right direction. So we think that having a requirement for a strong balance sheet is very important. Tether has in this moment as a group equity has around $176 billion in front of the $155 billion in market cap of the stable coin. And precisely, we keep just on top of the single reserves of the stablecoin, of the 100% of reserves of the USDT stablecoin, we keep around $6 billion in excess, right? Compared to the standard banking system that usually goes in fractional reserve up to 90%. So they keep only 10% of liquid assets. Tether has like 100 and something percent,
Paolo:
[9:09] Like 105 percent of liquid assets as reserves of the stable coin. On top of that, we have another 15 billion dollars as a group equity to add. So it's very unprecedented. And, you know, so we are basically in general, we are very excited. Of course, you know, we we need to see the final form also to proceed with our domestic with our intention of the domestic stable coin. But you know I just I just want to upload the the efforts that have been done by by Senator Agathe, Lammis and all the others David Sachs, Bo Hines
Ryan:
[9:42] Yeah, and the rest.
Sponsor Break:
[9:44] Assuming the Genius Act gets passed as it stands today, what doors open for Tether downstream of that? Like what happens next? What's your guys' strategy post Genius Act getting approved? And also, is there anything in the Genius Act or not in the Genius Act that you would have liked to have seen? Like what's your biggest, what would be your biggest amendment to the Genius Act, if any?
Paolo:
[10:04] So I think that the Genius Act would provide the clarity that everyone needed in order to operate more safely. So first of all we come from the last four years not as tether but as an industry we come from the last four years where was clear this thing called operation chalk point 2.0 where the OCC where the you know the administration and they were against crypto so banking was crypto banking was not very much possible and when they tried like remember 2023 when you know our major competitor almost died because of Silicon Valley Bank and Silvergate signature, all targeted by the Operation Chalk Point 2.0, but nevertheless almost killed our competitor. So that's not very good. Now, so I think that the new administration is creating a framework that ensures that there is support from the institution, the administration,
Paolo:
[10:59] From the federal authorities for crypto banking. And so that will improve the safety of the industry as a whole. So we're very excited about that. The Genius Act is also giving the opportunity to other players to step in, right? I mean, to me, when I see all the consortium of banks, JP Morgan, Amazon, and Walmart and others are declaring that they want to create a stablecoin, everyone, their sisters now want to create a stablecoin. That's great. I mean, the more the merrier, like a welcome player too, as I said on Because I think that the beauty of it is that unfortunately all these competitors will focus on the US markets.
Ryan:
[11:42] That, you know, the way I describe it is like.
Paolo:
[11:45] There is such an opportunity globally, that the opportunity is insane. There are 3 billion people in the world that are unbanked. And Tether covers
Paolo:
[11:53] 450 million users now, but all the rest are like, you know, there is so much to do. And so the opportunity is big but what i feel is like most of the competitors will compete keep competing in the u.s and europe because they are the low-hanging fruits and in a way in a certain way when it comes to profitability it's great for tether but also is not great for the industry itself or is not great for the end users because technically you would have more competitors so that you can bring the efficiency at higher level and also the cost at the lower level
Ryan:
[12:26] I do think Tether has done a fantastic job outside of the U.S. In particular to recruit new stablecoin users, and the usage metrics certainly show that. Paulo, I want to make sure we get details on.
Paolo:
[12:37] Kind of your plan
Ryan:
[12:38] Post-Genius Act, because there are multiple paths now, it seems, that Tether could take. And let's just assume the Genius Act passes. In fact, I was looking at Polymarket this morning. We've got an 80% probability on Polymarket, okay, that the Genius Act passes. So that's the best it's ever been. And I was thinking about last time we had this conversation with you, it was February 2024, and that was just a completely different world with respect to U.S. And its relationship to crypto, not to mention stable coins. We had Operation Chokepoint. Anyway, okay, let's talk about the path forward for Tether itself, USDT. We talked to Senator Bill Haggerty yesterday, who's a co-author of the bill, and we asked him specifically about Tether, and this is what he said. If an offshore issuer like Tether wants U.S. Market access, our bill lets Treasury run a comparability test. And if their home rules match ours, they can keep operating. Otherwise, they'll need a U.S. Subsidiary that meets the same reserve and disclosure standards as everybody else. He further said Tether can start complying tomorrow.
Ryan:
[13:38] So can you give us the details on kind of what's your plan? So you have USDT, which is currently not compliant. It seems like there could be a path to get USDT compliant. In order to meet that path, you have to go through some additional auditing rigor. You have to refine your treasury, maybe be more domestic, be more onshore. I'm not sure everything that goes into that, but there is a path there and you could acquire an OCC license for that. There's also the path that I think you have announced, which is to create a domestic tether stablecoin that's a separate type of asset that is really focused on the U.S. And then I guess you would preserve USDT. This seems to fracture liquidity, though. Anyway, give us a sense of what your plan is in some more detail here.
Paolo:
[14:23] Right. So our interest is, and I think that even with USDT, actually with USDT, we plan to follow that pathway to meet the requirements. Okay. I think that if you have a company, and last year we made $13.7 billion in profits, and this year I think we're going to beat that.
Ryan:
[14:43] Wait, $13.7 billion in profits?
Paolo:
[14:46] Yeah, last year. And this year I think we can do a little bit better. Look, only with, only having $155 billion, you know, the Fed didn't cut the rates. We have been saying that for a long time and, you know, kind of was true. So the rates are still around 5%. So you do the math, it's, you know, give or take 7.5 billion just because of that. And then all the rest we're doing, all the other investments, all like, you know, we have been investing gold and Bitcoin and all that, right? So it's, well, this year, I think we are going to do much better. You know, still the year is long, but, you know, do you, why people do think that we don't have the ability to meet with the requirements? Because I'm not saying that you said that, but I saw that on X, right? So people think that we're going to let it go. We are going to not continue to support the best business in the world. You know, why is that? I mean, again, we have the profitability to, and by the way, we are acquiring more treasuries than anyone else apart maybe a couple of countries but you know the pathway is is there like last year we were the fifth largest purchaser of US treasuries okay
Ryan:
[15:55] Just people don't appreciate the stat the fifth largest purchaser of US treasuries and that's taking into account all the countries that are purchasing US treasuries as well so number five ranked with like entire countries.
Paolo:
[16:11] And we are in total, overall, the 18th largest country. We are not a country, but holding US treasuries. So that's the power of stable coins. And I think that Besant understood that very well. The president understood very well. It's one of the best aids to the US economy. And look, think about it. The one thing that is very powerful about USDT compared to everyone else is that USDT focuses outside the United States, but also means that it's people outside the United States are purchasing USDT. And with that money, we purchase US treasuries. So in a way is people is, we are decentralizing the ownership of the US debt so that you don't have one single guy like Xi Jinping that can press a button and sell them altogether. It's 400 million different brains that will not act altogether.
Paolo:
[17:07] And that is great service first. But also, I think that is much better for the U.S. To have the debt of the U.S. not owned by U.S. people. Otherwise, I think that that is kind of the recipe for disaster. So you want people outside the U.S. owning the U.S. debt. And so that is also what that is making. So we have, as I said, as I think Senator Hagerty is right, right? There is a pathway. There is a process, right? So there is a pathway that you have. There is a comparable regime, reciprocity. It will take a bit of time. Because, you know, countries have to create these regimes. And what I think will the Genius Act do is exactly this. Will open the path for every single other country in the world to adopt the Genius Act. Almost exactly like that. So that there are, the US is the greatest country in the world. So everyone will copy that. Because if you think about it, apart UAE, I mean, Europe has a very, very bad regime with like 60% of reserves that has to be kept in an insured cash deposit. That's what happened to our competitor with Silicon Valley Bank. So you don't want, Europe has a bad regime, but everyone else, like UAE, has a very similar regime to the Genius Act. And, you know, Singapore is dipping their toes in the water. But when the U.S. will pass this, I can guarantee you that every other country will follow. And that will open a path for reciprocity.
Ryan:
[18:29] Okay. But on USDT then, it sounds like you're saying your primary plan is to just get USDT compliant with the Genius Act. But if that's the case, then why launch a domestic on US shore asset as well? Why have two? Is that just for redundancy? Is that like a backup plan?
Paolo:
[18:49] No, it's a great question, but, you know, I think that it serves two completely different use cases. The way I see it, maybe it might be controversial, but I think the U.S., will be a market where the current stablecoin business model will not work. So, of course, there is a lot of frenzy now in the U.S. because of the Circle IPO, but no one will make money in the U.S. It will be a race to the bottom on making the money on stablecoins in the U.S. Sure. Look at when exchanges, crypto exchanges, starting in 2012, well, around 2010, right? Right.
Paolo:
[19:26] And Bitfinex was in 2012 was making 20 basis points in fees, every trade. Now you get one basis point is a taker fee compared to 20, like 10 years ago or 12 years ago. And, you know, it's basically a race to the bottom. When you have, look at the US, US is the market in the world where there is the highest efficiency as money rails. So you could argue that US has 90% efficiency of financial rails. So if you add a stablecoin in the US, you will bring the efficiency from 90% to 95%. So the premium that people will pay for that is very little. If you are in another part of the world, you are like Nigeria, the efficiency of financial rails is like 20%. If you add a stablecoin, you get to 50%. So you have an increase of 30% of efficiency. So that is why you know people in emerging markets are happy if they leave to us the the the interest simply because the intraday volatility of their national currency is higher than four percent that you can give them on a yearly basis so to me it's important to have a distinction between you know two products two use cases basically to me in the u.s stable coins will become at some point,
Paolo:
[20:46] Tokenized money market funds, like I was seeing this JPMD, it will be kind of like that. And like every other stable coins will be coming like that, where basically
Paolo:
[20:56] the entire yield will be shared back. And so to us, then in order, the stable coin in the US that we want to create has to compete on a different level, has to compete in programmability, has to compete in services, has to compete not with it does not cannot compete with the same business model that we have for usdt that is a stable coin that is made for the foreign world i
Ryan:
[21:19] See so you're still thinking two products potentially because they will serve two different use cases but you're also saying that you you do intend to get usdt compliant under the genius act as well.
Paolo:
[21:30] That is our intention yes
Sponsor Break:
[21:33] There's a growing conversation about domestic stablecoin issuers. There's been a bunch of rumors about things like Amazon, Walmart, even like Meta, Twitter, launching stablecoins. And we also know that like JP Morgan, City, Wells Fargo are also, they're exploring this consortium stablecoin. Kind of feels like COPE to me, but that's just my opinion. There's going to be a lot of domestic competition coming out. So if large US banks can mint tokenized deposits that settle against Fed balances, what moat would you say Tether still has in five years after this becomes pretty commonplace domestically?
Paolo:
[22:06] So there is still a lot of potential with our distribution partners and our own distribution networks, right? So again, the thing is that banks usually would sell their stablecoin to their own customers. So I don't see a bank breaking, you know, banking employees breaking their back in the streets, you know, doing educational stablecoins and going to basically the normal people or the people in the lower west tier or a tier of richness that always was our approach right so we never went to when we open a new country we don't go to you know the local biggest bank like our competitors we go we do education in the streets we work in the streets we explain how to we do education in schools we we we go door to door basically we find the the partners locally that are aligned with exactly this vision of grassroots adoption from the bottom up. And so that is also possible. I mean, although the U.S. Has great financial rails, still, you know, I was reading that, you know, people struggle even to keep bank accounts open. So more and more in the U.S., you will have a tier of population that will benefit from a product that has our more like more direct approach to people rather than, you know, sitting on an ivory Tower and, you know, just thinking that the world is the same of 20 years ago.
Sponsor Break:
[23:30] Now, I want to bring up the conversation of the Circle price post IPO launched at $31, now trading at $200. I saw some napkin math on Twitter that if Tether was given a commensurate valuation, Tether would be valued at something like $3 trillion or something like that. What's your reaction to the price action of the Circle post IPO?
Paolo:
[23:52] It's great. So we don't want to go public, first of all, because, I mean, companies that want to go public do it for two reasons. Either they need to have access to capital, but our profitability is so high that we don't need that. And second, we would need, and by the way, we invest, with our profitability, we invested, I think, in the last two years, more than $5 billion in the United States.
Paolo:
[24:15] That is something that is very little mentioned, but it's very important. It's like, so we are giving back also to the country that, you know, has created this great currency, like the US dollar. So, but, you know, you go public because you want to have access to cheap capital or because, you know, the shareholders wants to have an exit and we don't need either, right? So we have great profitability and at the same time, we don't need an exit. We need, I want to stay with this company forever. I, you know, we are, we are having fun, we are, we are enjoying, we are, we think that it's almost like we just started this company because there is so much to build the same, so much to prove so much, many more ideas under, you know, same, same concept of USD, but different verticals, different sectors, like in terms of disruption, right? So disruption for the benefit of, of the people and not, not the, that's it, a few corporates. And so the, But when I see that multiplier, I was like really thinking, well, that's a nice multiplier because, you know, at some point you have to, you know, price what you are doing. And if that is comparative, that is a great price. I mean, we'll see how long it will last, but for us, it couldn't be better.
Sponsor Break:
[25:33] Going back to this notion that Tether is sitting shoulder to shoulder with countries when it comes to owning U.S. Treasuries and then this implied, you know, not really fair, but implied valuation of multiple trillions of dollars. Does it stress you out the magnitude of what you're building and what you're doing? Like if I was managing enough treasuries to be considered a country in terms of just like geopolitical weight, that feels like a lot of pressure. Do you ever like, do you stress out about this? Do you worry about this?
Paolo:
[26:05] Look, it also ties into, you know, sometime people, you know, there is this old fud of, oh, Tether, you know, even in the respect of what I saw on Twitter in the last recent days, it's almost like people still think it's, you know, it's 2014. People think, oh, maybe Tether, you know, Tether wants to hide and all that. We keep our money in Cantor Fitzgerald, that is a prime U.S. Institution. We keep $120-plus billion in Cantor Fitzgerald in U.S. treasuries. So we are not hiding ourselves. We keep our money in the United States. So that's going back to the Genius Act, right? So it's not like, oh, Tether does not want to comply or all that. I mean, we keep already our money in the U.S. And so Dio has basically control over our money because it sits in...
Ryan:
[26:58] One of the.
Paolo:
[26:58] Most regulated entities in the world that is a primary dealer that has a direct connection to the Fed and all that. So the reason why we are, we keep our money in counterfeit is because I can sleep well at night because, you know, they have a direct connection to the Fed. We have a great line with overnight reverse repos and repos. So it's, it allows us to be comfortable if we get tens of billions in redemptions, we can meet them without problems. And that's, I think, the beauty of the setup. And I think that this administration and the Genius Act will help in making
Paolo:
[27:36] this industry even more solid.
Ryan:
[27:38] Paolo, I think investors right now are really trying to figure out what's the value of this whole stablecoin thing, right? So you could see Wall Street, the gears are grinding as they try to value Circle. And I think everyone is just like stablecoins have just come on the radar for a lot of investors. And this has been silent in the background, just growing and growing and growing every year. And I think Tether is finally getting a spotlight. I mean, Scott Besant, the Secretary of the Treasury, just it seems to have come on his radar that this is a big net buyer of bonds. Anyway, when it comes to valuation of stable coins in general, right, we're talking about a $45 billion market cap for Circle. David just read out the numbers. That's on like $150 million or so in annualized net income and annualized profit. You just said you were generating 13 billion. Okay. And that was last year. And you said you expect this year to be bigger than that. And so I'm just like calculating the numbers. David said 3 trillion, which is interesting. That would place Tether in the top five of all companies. I mean, just below what.
Ryan:
[28:45] Nvidia and maybe Apple and Microsoft kind of in that camp. But it's not inconceivable based on the cash that you're throwing out. And then there's also this vast, very strong treasury as well. Anyway, I know it's an interesting question for you to ponder, but now you have public market comps of a pure play stable coin company and it's trading God knows how much, I don't know, 200X profits something like this pe ratio so what like what do you think tether is actually worth today.
Paolo:
[29:15] To me a lot so so
Ryan:
[29:18] That is i should.
Paolo:
[29:20] Say so yes to me a lot but because it's it's so it's my baby right so it's uh to me it's uh it's worth a lot but look i i don't know how sustainable i mean i don't know how many companies sustain 200x and again if they can continue to sustain 200x is great is great for for for us i mean as as comps as you said we are we are not seeking for for you know we are not actively seeking for investments so we don't need to raise money that's the problem so it's we'll see i mean but it it's it's just nice it's nice to see right it's nice to see because in the end it's a an industry that we feel we created with in 2014 And so we're just proud. Like we, it's every day I wake up and pinch myself, you know, looking at these numbers, like I come from a town with 600 people and living there and with cows and chicken roaming. And so like these numbers are out of this world. And I think it's, you know, just the entire, this is actually the achievement of an entire industry, including the crypto industry. You know, we went so far, we improved, we had up and downs, but there are so many people that were stubborn and kept going even in the difficulties and built all this. So, you know, it's a congratulations to everyone, I would say.
Ryan:
[30:40] So let's talk a bit more about winning kind of the next phase of stable coins,
Ryan:
[30:44] right? Because right now, I think it's safe to say Tether has won phase one. And that has been, well, stable coins have been primarily crypto native. Genius Act means we're entering a phase two. David mentioned a whole bunch of U.S. companies that were talking about getting into the stablecoin game. All of the banks, these are your new competitors, right? So welcome to that. Now the banks are going to have a play at this. So will the tech companies as well, something like Meta. I read an interesting post from Arthur Hayes. It was just on stablecoins. And he makes the point that the stablecoin game is all about distribution, right? And Tether came out first, came out early, really pioneered the sector, had all of the crypto-native distribution. Fantastic. I think, saturation and offshore. You know, Tron is a fantastic distribution network, it seems like, for Tether. 80 billion Tether on Tron alone and a lot of usage and payments there. Anyway, the next phase of this whole stablecoin game, you're going to be faced with big tech. You're going to be faced with companies like Meta. Because Meta have over 3 billion users worldwide. And so it's a new chapter. How do you win the next chapter with respect to distribution of the Tether Stablecoin?
Paolo:
[31:54] Well, one thing is interesting, maybe, you know, again, the Genius Act is not, maybe, you know, we need to wait. But it seems like companies like Meta might have an hard time to launch a stablecoin, if I'm not wrong, given the Genius Act, right? So there is kind of a sort of a prohibition if you are not primarily involved in finance, there is kind of a sort of prohibition. If you know that that is at least my take from from the language that is so so that is going to be interesting how it will play out so i think that big tech companies will need to to partner with existing stable coins providers or with maybe banks in order to support you know someone else stable coin and get a rev share for sure but that will create a very interesting dynamic because i again it feels like meta or similar you know will not be able to launch stable coin again And I could be wrong given the language, but I think I got it right. And so, but when it comes to distribution, people, you know, Tether has more than 100 companies in its portfolio investments done with Tether investments, not as the reserves. And so that is where part of the profitability goes and went. So that gives us enormous distribution channel. Think about the U.S. domestic stablecoin.
Paolo:
[33:09] Ramble will launch a Ramble wallet and has 70 million users. It's not bad to start with. You know, it's a good bootstrap. You know, I think that is pretty much how many active users, well, much more active users than probably the biggest exchange in the U.S. So it's a great bootstrap. And then there are other opportunities that we invested in, like where that could, that actually built and helped Tether to build in the last 11 years, the biggest distribution network for the US dollar in the history of humanity.
Paolo:
[33:42] So we have millions of physical touch points around the world. So the reason why Tether is the leading stable coin and has such high metrics like 450 million users, we grow by 30 million new wallets per quarter and we publish that data. We have this website called usdt.network where we publish the updated data. 37% of our users are savings accounts, for example. So we collect all these statistics. The reason is because we are actually growing and we have been building this distribution network that is unprecedented, is granular, is with boots on the ground, or really the smallest village in Philippines. Or we invested from remittances companies to bodegas in Central South America to building kiosks in Africa. So, you know, just in Africa, you know, we build, we are building, we did this pilot with 500 kiosks with solar panels on top and rechargeable batteries inside. In Africa, 400 million people don't have, 600 million people actually don't have access to electricity. And so we build these kiosks with solar panels on top and batteries inside. We sell subscriptions for 30 USDT per month to the people in these villages. And we have around 500,000 users already.
Paolo:
[35:01] And 10 million battery swaps. And by end 2026, we're going to have 10,000 kiosks. And end of 2030, we're going to have 100,000 kiosks. So we're going to touch around 30 million households by 2030. It means that 120 million people on average in Africa. First of all, it's a change that you can see from space because you light up a continent. And also, you have 120 million people that are going to rely on a day-to-day basis on the US dollar in the form of UST. That's how you bring the US dollar hegemony farther and you bring it to the emerging markets. That's what we, you know, what boiled in our pot for the last many years.
Paolo:
[35:43] And that is one of the least understood things about Tether.
Ryan:
[35:45] I was going to say, I just like as going over these stats that you're talking about, and this is all on USDT.network, right? 440 million total estimated users of Tether. I feel like the entire U.S. Has been sleeping on this use case. I mean, there's been so much talk of crypto not having a killer app. It being just kind of a speculative casino, just, you know, Bitcoin, that kind of thing. We have 440 million users using the US dollar. How did this first phase of distribution happen? Was it all cut? It can't have been all an emerging market type of story, right? It's like, can you explain these numbers to people who are seeing them for the first time?
Paolo:
[36:28] Actually, it's funny because if you can scroll down a little bit to the chart of the growth of the market cap here, right? Look at 2020. And what happened? And do you know what happened in 2020? Do you remember? Oh, yes, we had a
Ryan:
[36:43] Little global pandemic. You talking about that one?
Paolo:
[36:46] So, and, you know,
Ryan:
[36:48] For people who can't see, we are at 4.7 billion tether in 2020.
Paolo:
[36:53] Yes. So, and this is in retrospect, right? Because we didn't have a marketing team until 2022. So, and look at the growth up to 2022. So, the reason why that happened is we understood recently, We went back and we did a lot. We asked a lot of questions to ourselves. And so think about the emerging markets in developing countries. They have two common denominators. You know, well, three. They are in general poor. They have this high, you know, high inflation, higher than, of course, the wealthier countries. But they have two other things. They have good penetration of smartphones. And so they're still very digital. And they have more children. So they eat more youth, younger population. From 2017 to 2020, this youth is the one that learned about crypto before anyone else.
Paolo:
[37:45] And in the meanwhile, in 2020, when the pandemic happened, something changed. The parents of these kids were going in the streets with the pandemic. The pandemic accelerated the loss of jobs everywhere, but especially in emerging markets, like in the US and Europe was bad, but in emerging markets, the pandemic accelerated loss of jobs, increased inflation, and it did all that, right? And so what people did more and more during the pandemic with the fear was going out in the streets and buy cash dollars. Because if you live in Argentina, at the beginning of the pandemic, the Argentinian pesos started to tank. And then you get scared. You are risking to lose your job because of the pandemic.
Paolo:
[38:31] You cannot go to work. You go out in the streets. In the black market, you buy cash dollars. but the kids in 2020 look at their parents going out knowing that there was the pandemic parents putting themselves even more at risk going to black market with the pandemic and the kids were like dad why are you going out to buy dollars i have dollars in this app that's how it all happened that's crazy it's very ambling but it's how it happened and the charts prove it.
Ryan:
[39:01] What apps are they using for this? Is this kind of like crypto exchange type apps? Are these like, you know, everything MetaMask wallets? Are these just wallets that are connected to Ethereum and Tron?
Paolo:
[39:13] Local exchanges, you know, small, I mean, a variety, like an infinite number of wallets. Like we never said, oh, use this wallet, use that wallet. Like it's truly when people are in need, that's the issue with Europe and the US in a certain way. Right. So we still live in a situation that is better than anyone else for most of the people because we have our problems but you know again that is far better than and everything is relative and and we are still back far better our economy does far better than anyone else that's the reality and so when you are in need when your family is at risk when you work from january to december for 12 months and at the end of the year you're poor compared to the beginning of the year because your my value with your currency devaluated so fast You will find any possible way to save your family and to protect your family. And that is exactly what happened here. People find, found ways to go out and, or sorry, to find ways to hold dollars and to have access to dollars through local exchanges, through Binance, to you name it. But they found every possible way through the kids. Because again, the kids were playing with crypto because they're young kids. They try everything. They know everything. They're small hackers and growing, right? So day and then word of mouth, because one parent goes to the other parent and says, well, I did this, I'm testing this, I'm buying dollars on this app. And so that's how it went.
Ryan:
[40:41] So how much do you think Tether market cap is tied to the total market cap of all of crypto? I mean, there seems like to be some correlation there, right? It's saying, you know, got massive acceleration up to 2022, and then we had kind of a dip. It didn't go all the way back down, but slightly, and then more acceleration. Is it tied to crypto market cap at all?
Paolo:
[41:01] Honestly, I mean, I think that right now, only less than, I mean, we are running some statistics around that, right? But I think that from what we see around less than 40%, to be conservative, less than 40% of our market cap is due to crypto.
Paolo:
[41:17] So the rest is actually grassroots usage of of usd in emerging markets i think that the next leg of growth of usd market cap is commodity trading like every single the biggest commodity traders are pinging us calling us because for them usd is the best thing after slice spread because when you have you do you need to do you need to do international trades and you are relying on the slowness of banks, the efficiency of capital is very bad for commodity traders. And now they are looking at USDT as a solution to make their portfolio infinitely more efficient.
Paolo:
[41:57] Because if you're a commodity trader, usually the commodities are both from the emerging markets. So if you are a commodity trader, for you sending USDT or a pigeon or whatever is accepted by the seller is great, but you just want to make sure that the seller will receive the money as soon as possible so that you can move on to the next deal. So for them, for the commodity traders, USDT is great. For the seller, the seller is in an emerging market. So we'll get USDT and we'll find a user base for USDT directly in the market. So they can pay salaries in USDT. They can do everything USDT. And so look at Bolivia. I posted a tweet about Bolivia one week ago or so. You have in Santa Cruz and other villages in the cities in Bolivia, like in the shops, there are like the price stats are in USDT. We never went there. We never been there. We never had a person in Bolivia. All happened organically.
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[44:32] I want to turn the conversation to Tether Ventures because you're doing a lot over there. There's a lot of different investments going on out of the Tether portfolio. And then now there are investments that make sense that I definitely want to talk about. things like Plasma and Stable, these like layer one chains that are specific for Tether. But then there's also just a bunch of more kind of like eclectic investments that you guys make. There's acquisition offers for basically like mobile networks, telecom networks, on ramps, and just other infrastructure companies. There are energy startups in the Tether portfolio. There's like these media tech companies like for the help creators make content out there. And I believe you guys also own an Italian football team as well. So there's a bunch of like interesting investments coming out of Tether Ventures. Maybe can I just talk about that strategy going on there?
Paolo:
[45:19] Yes, I mean, the portfolio is big, right? So you have to create different verticals. So as any good portfolio, you know, that is again outside the reserves. And for any good portfolio, You have a part that is very conservative and very stable. So we buy some Bitcoin and gold with that. But also we started recently to buy land and agricultural companies. So this company called Adeco Agro that is listed on the U.S. market. They are the biggest or one of the biggest landowners in South America between Brazil, Argentina and Uruguay. And they are producing also dairies and biothinol, but also dairies, rice and cattle stuff.
Paolo:
[46:04] Why that, right? So first of all, land is a very scarce and safe asset and historically slowly, slowly appreciates, right? So part of your portfolio you want in something like that, in something that humanity will always need, like land and agriculture. But on top of that, you have to think about the fact that, you know, this agriculture is commodity. commodity trading could be, you know, what I said about commodity trading and USDT can be applied also to agricultural commodities. And so USDT and stable coins in general will expedite also agricultural companies to have better, you know, efficiency when it comes to access to capital, but also when it comes to just payments for the goods that they produce. So that is a very interesting combination between the two things then we have another silo that is new technologies artificial intelligence is one we are building our own peer-to-peer ai platform called qvac it's going to be insane and very very cool really unstoppable ai i i think that with the way i like to describe it is like the comparison between when you had the when i was in the elementary school you had like the teachers were forcing you to do like calculations by mind, right? So the sum, the divisions and all that. Then the CASU calculator started and I don't know now, but you know, most of the people that I meet, they might not be able to do simple math in mind.
Paolo:
[47:28] And so, and imagine like, and that is, so we lost our ability. Many people lost their ability to do in mind the calculations. So imagine if, and because you have a replacement for that, imagine if you have the same thing for intelligence, right? So you think less because you have an aid now. Now, it's fine because that is where the future will go. But what you could say about not your keys, not your coins, you could say also for not your AI, not your intelligence, in a sense that you don't know if you give all your data to a big corporation that also owned your intelligence, that is not becoming more intelligent. It's becoming dumber and making more money and becoming to the other company and so that also that company will become more intelligent.
Paolo:
[48:11] Our ability and given our balance sheet and the fact that we are a very unique company that has the technology capabilities but also the capital to build whatever they want we we are trying going to trying to build technology and ai platform that will bring ai closer to the people so the ai platform will run on every single device can adapt to the gpu of the device working from from a 30 smartphone to like a flagship phone to any laptop to any server right we'll just automatically decide which model to use, which number of weights to use, and all that. So we've been invested in biotech. There is this company called BlackRock Neurotech. Doesn't do anything, does not have anything to do with BlackRock. We're going to change the name. And, you know, the idea is like, to me, brain-computer interfaces are very interesting because they are the ultimate hedge against the robots killing all of us. So I think that humans will need to become more intelligent. Have but in order to become intelligent they they need to have a mathematical coprocessor in their brain that will not share all their thoughts with open ai right so the idea of combining local intelligence plus brain computer interface is very exciting to me i'm a big sci-fi and nerd i mentioned the football club well yesterday juventus won 520 in the in their first match of the U.S. World Championship for clubs. So great start.
Paolo:
[49:39] So, you know, that is an Italian football club. Myself and Giancarlo have been football fans. I mean, the investment compared to our portfolio is not that big. Right. So, but we are football fans.
Sponsor Break:
[49:49] That one was more for fun.
Paolo:
[49:50] Just a little bit of fun. Yes. But if you think about it, it could be an insane distribution channel. Juventus fans are everywhere and scatter all over the world. So actually, we could bring more football fans to Juventus through our network. Plus, you know, Juventus network could be beneficial to that in longer term.
Sponsor Break:
[50:07] When you're looking at a potential investment, is distribution the first thing
Sponsor Break:
[50:11] that you kind of evaluate? It's like every investment that you make, distribution is kind of the top of the list of things that you care about.
Paolo:
[50:17] Yeah, exactly that. I mean, even with AI, the AI platform, I think that AI, we are going to have one trillion AI agency in the next 15 years. And every AI agent should have a non-custodial wallet. But I doubt that, you know, an AI agent will have an account at the Fed or in JPMorgan, right? So we are building this SDK called WDK, wallet development kit, will be fully open source and will allow, like, everyone to build full non-custodial wallets. We don't have any keys. You can create any model you want. We'll support all the different blockchains. And the idea is that paired with our AI platform, I want, basically, I see a user experience where I have my smart fridge, shows me a QR code. The QR code is linked to like an on-costal wallet
Paolo:
[51:00] Give like $50 to my fridge and the fridge will just do groceries for me, right? So, but I don't want basically my fridge money to be in PayPal, right? So that I don't think is the right experience. It's also because if you have, you know, billions of equipments and even I see a future in 20 years where light bulbs should have a very, very tiny AI that will understand what is the best level of electricity to use and the best lighting for that specific moment in time ambient and we're going to go there maybe not in 20 years maybe in 30 years and 40 years so that's sort of the reason why we are doing local ai i don't think that every single light bulb can be connected to chat gpt we'll crash the servers of chat gpt the latency will be insane and all that so local ai is going to be very important plus giving a wallet to local ai is going to be very important and if you have a stable coin to add to that wallet it's going to be great
Sponsor Break:
[51:53] There's a couple of investments that tether has made that has hit the zeitgeist on the crypto side of things plasma stable there's a bunch of layer ones that are trying to become just tether based layer ones notably fees on tron have like really cupped
Paolo:
[52:07] Up recently i
Sponsor Break:
[52:07] Think the average fee on tron is something like four four or five dollars which as a payments blockchain is just not not going to work and so plasma stable like i mentioned a few others are all trying to be a payments blockchain that's Tether specific and Tether has invested in all these. Are any of these supposed to be the Tether chain or how do you think about this like investment into a handful of Tether specific high throughput blockchains?
Paolo:
[52:34] There is no Tether chain and I don't think there will be ever a Tether chain but there are good opportunities and good teams that can build great ecosystems. So I foresee, you mentioned like higher fees in certain chains and, you know, that varies over time. Like sometimes the chain has high fees, sometimes it's low fees. I foresee a future and I never see this user experience and I'm trying to, I want to craft it in some of the wallets. Tether might launch a wallet by the end of the year. We'll see. But, well, actually never said it before, so.
Ryan:
[53:07] That could be breaking. Might launch a wallet on, you know, particular crypto network or will it support.
Paolo:
[53:12] No any network will support every network but okay one thing that excites me is that we we want to launch it with wdk right so everyone can actually build a wallet like ours so we
Paolo:
[53:24] We don't want to make money with the wallet. Actually, I would prefer to not launch a wallet, but I want to make sure that there is a good product out there, right? And imagine a wallet, and I'm still thinking through it because, again, I never heard of it. Maybe someone else is already doing it. But given that now we have been working with grassroots community projects like USDT Zero and similar, USDT Zero is a very cool project and they're building these cross-chain layers. Imagine a future where you have a wallet or multiple wallets, and basically these wallets will use these cross-chain swapping facilities to swap part of the USDT of a user to the chain that has lower fees.
Paolo:
[54:10] So in a way, you create an incentive for chains to have always lower fees if they want higher TBL. So that is a level of user experience that I think at other wallet or WDK so every wallet that will build on a WDK can enable and I think is the best thing for for the end user because we want to have fair competition across the different chains we want to see like an ecosystem ecosystem to grow and so that's something that you know as long as a chain has fair fees and low fees for USDT that should be prioritized in my opinion so imagine an algorithm that will automatically start converting and moving based on certain factors, user preferences and all that will basically create a preference for a certain chain. We don't decide. I don't want to have to decide. I don't want, I should not be able to decide. Every user should decide which chain is the best for them, right? That's the point.
Sponsor Break:
[55:00] The Plasma chain, the one that's kind of really caught the attention of Crypto Twitter, it's actually a Bitcoin side chain. And really before Tether blew up on Ethereum, the supply of Tether blew up on Ethereum, it was actually on Omni Network, which was kind of like the first really expressive chain. And that was also a Bitcoin side chain. And it was like it was a Tether dedicated chain really before we as an industry had really figured out blockchain tech. So it's a little bit kind of like a full circle, like Bitcoin side chain that was Tether focused, then Tether issued its stablecoin on Ethereum. The supply grew there. Now Tether is all across many different networks. And now it's investing in, you know, incubating its own kind of Tether chains, one of which is a Bitcoin side chain. What would you say Tether's relationship is with Bitcoin. Do you guys think Bitcoin is special? Is it just another chain? You guys obviously have reserves in Bitcoin. So you're obviously bullish Bitcoin. Like when you look at Bitcoin, when you think about Bitcoin, what do you think?
Paolo:
[55:52] I love Bitcoin. And we, as a starter, we love Bitcoin. We, you know, it's, it's the reason why we enter in this space. There is some poetry around how Bitcoin came about. And, you know, the fact that, you know, it's, it's, it's a simple chain, right but it does what it needs to do and especially I love it because I know that will work in the worst case scenario. The 10 minutes block time, people say, oh, it's very slow. And it's true. It's very slow. That's why you start having these layer twos and or like network,
Paolo:
[56:25] LightSpark, Spark as a blockchain and all these similar, or like you have Plasma and you have other opportunities so that you shouldn't do payments on, in my opinion, even Ethereum is not aiming to do payments.
Paolo:
[56:39] It understands that there is a bottleneck if you do payments on layer ones. Right so eventually you need to have scalability layers and it's fine and that's the right approach but the true immutability of of bitcoin the fact that is my opinion with 10 minutes block time is very is very aligned with tether value in the fact that if you have a 10 minute block time and around like between one and four megabytes block size even if you are in a village in africa you might have the ability to download four minutes in sorry four megabytes or a few megabytes every 10 minutes right so even even with an antenna is proven you know in the middle of nowhere you can download the bitcoin blockchain if you have a like a faster block time
Paolo:
[57:25] It's much harder for people in the emerging markets cope with that speed if you think about things like solana it's very very hard for anyone to run a node if you are in a not super like connected country so to me there is there is something that is very special to bitcoin because of that is the ultimate inclusion even in the worst case and are even in the world war three then i don't i don't i mean other blockchains have different use cases but it's important to distinguish the different use cases like for example plasma is vvm compatible right and and or like a blockstream liquid is another great bitcoin side chain they are working on simplicity that is like as kind of like a turing complete contracting system so i like innovation that happens also outside of bitcoin but you know to that is our first love and actually is very aligned with our mindset it's
Ryan:
[58:20] Also very aligned with your treasury strategy it seems like so a hundred thousand bitcoin on the the tether treasury do you think you'll ever add other crypto assets to that treasury.
Paolo:
[58:29] The problem is that no i don't think well i don't think we are going to ever add any other assets but also you know it will be a bad signal bitcoin is the only chain that does not have That does not have controllers in a way, right? So it's like, so we are not playing favorites if we have only Bitcoin. If we start adding like chains where there are like foundations behind the chains and all that feels like we are playing favorites. So for us, we stay out of trouble, just Bitcoin. You know, it's easy enough, it's simple, clean. That's what we like. How about Bitcoin mining?
Ryan:
[59:11] I believe Tether is investing in that area as well. Can you get us updated on that?
Paolo:
[59:14] Yeah, I think Tether is set to become probably the biggest miner in the world at the end of this year. Wait, wait, the
Ryan:
[59:23] Biggest miner as well? So Tether is going to have the biggest Bitcoin miner in the world?
Paolo:
[59:28] Yes. So there is this thing about Bitcoin mining, right? So if you have an X amount of money to invest, and imagine you have to choose to invest in Bitcoin mining or buying Bitcoin. 99% of the time You will make more revenues More profits If you invest directly in Bitcoin Rather than doing Bitcoin mining So why the hell we are doing Bitcoin mining Is because if you have Hundreds of thousands of Bitcoin You want to have Or you want to participate To the security of the network Because isn't the way You are protecting your treasury To participate into the To the security of the network Right
Ryan:
[1:00:09] So there is an.
Paolo:
[1:00:10] Incentive to do that If you have a huge You'll
Sponsor Break:
[1:00:14] Be the most aligned actor, miner of the Bitcoin network because there are like some people, myself included, I would say are they're considering the security risks of Bitcoin when the subsidy runs out. But I think what you're saying is like, well, if we own the biggest miner and we hold over 100,000 Bitcoin, then we will make sure that the Bitcoin network operates just because we hold
Paolo:
[1:00:34] A lot of Bitcoin. Yes, that is something. And we are trying to decentralize it. We have operations in South America, in many different countries, of course, also in the U.S. We are investing in the U.S. Bitcoin mining. Again, we really believe that in the importance of the U.S., especially in this particular moment in time, right? So we feel like we need to be helpful and we need to contribute back. At the same time is, you know, for Bitcoin is important to have, you know, a strong support also from the mining side. What I believe what will happen is that when the profitability of, so when the block reward will go towards zero, what will happen is that fees on chain will skyrocket. And I believe that basically what Bitcoin will, the Bitcoin main chain will be a settlement layer for lightning style channels or for basically very important contracts that will behind the scenes will incorporate an enormous amount of of of operations right if you think about now like a lightning channel you have basically the two sides open basically to a bitcoin transaction on layer one
Paolo:
[1:01:43] Like on the native bitcoin chain and after they did that initial transaction they have a direct channel between themselves they can send like a zillion transactions on the layer two and then eventually they can decide to then settle back on layer one that's when they're going to pay fees so if you did of course if every time you do a payment you pay 500 in a fee it's like you you scream like it's like you you want to break your laptop but if you pay 500 for a transaction but that is actually the sum of 1 billion transactions, you might say, ah, I got access to the most secure network in the world. So you divide 1 billion transaction divided $500 is not that much, right? So that in a certain way, I think that is the kind of one of the most beautiful dynamics and we'll see how it will play out. But the more new layers will happen or the more new application will happen on Bitcoin, they will all happen on different layers. And so these layers will just anchor to Bitcoin. So Bitcoin will become just a security layer for anchoring, for everything else.
Paolo:
[1:02:50] And simple as that. Will not be used for transactions.
Ryan:
[1:02:53] Let's talk about another very traditional asset, which is not the digital gold, but the actual gold gold, which is kind of a use case that's been around for a while, but seems to be increasing. And maybe you can update us on the stats, but I was looking, there's almost $2 billion dollars worth of tokenized gold on chain of which i think tether is close to 50 of that that's been like creeping up in the background i guess you know gold price is appreciated so that is a contributing factor but it does seem like the demand is there too what's the story of tokenized gold do you think and how big could this.
Paolo:
[1:03:25] Get i think that tokenized gold is going to be massive right in last year we saw a huge interest additional interesting in the product Tether, compared to the other stable coin, gold stable coins, has physical gold in its own controlled vaults. And so, you know, the interest of having a gold stable coin is because you want to have a hedge against, you know, many things, including potential crash in the financial markets. And you never know if the paper gold is fully backed. You know, you have to trust the system. And I think that not your vault, not your gold is a pretty sensible approach. So Tether, between the gold stable coin and our own gold as Tether, we have around 80 tons of physical gold. Wow.
Ryan:
[1:04:20] Okay. So you both hold gold on the treasury. I think I saw estimates of that. That's about 50 tons of gold or so, maybe on the treasury.
Paolo:
[1:04:26] No, now it's 80, around 80. That's 80 total, 80 total.
Ryan:
[1:04:29] And then there's also this tokenized gold product. For people who aren't familiar with tokenized gold and the way Tether does it, what exactly is it? Because obviously it's a tokenized version, so it's an IOU for some gold that exists somewhere. But you're saying in Tether's case, Tether actually owns the vault and kind of controls it. What is this product for people who aren't familiar?
Paolo:
[1:04:49] Most of the biggest big gold bars are like around 400 ounces. They are like around 12.5 kilos. So we basically for every bar that we have we generate XLT tokens that are gold tokens so for every ounce of that gold bar so you have like 400 ounces or like 399 ounces for example a gold bar we generate 399 tokens up to six decimals, right, of precision. So for every bar, we buy the bar, we store it in the vault we control. It's in Switzerland and in basically, I think, the safest country and the safest place in the world for gold storage. And we tokenize it and we make it available. So if people can actually redeem, actually that already happened, people can redeem if you have enough gold tokens for one full bar you can come to Switzerland and you get your own gold bar really
Ryan:
[1:05:47] So you can you can you can redeem the actual token the tether tokenized gold for actual gold bars in person physically.
Paolo:
[1:05:55] Yes you have to have you know of course the full bar like the full enough ounces for to cover the full bar but yes then then yes we are not going to sow your
Sponsor Break:
[1:06:03] Bar you don't do fractional bars
Ryan:
[1:06:04] No fractional bars David you gotta buy a full bar It's cold or nothing, man. If you want it physically, but tokenized, it could be very fractional, I assume.
Paolo:
[1:06:14] Yes, exactly.
Ryan:
[1:06:15] That's fantastic. A very cool product.
Sponsor Break:
[1:06:17] Any other tokenized asset that you're going after gold?
Ryan:
[1:06:20] You're going after property next? Real estate? Oil?
Paolo:
[1:06:24] No, the problem with oil or silver, like think about it. Silver would take 100 times the space because it's 100 times less valuable. So, you know, it's going to be becoming a huge operation. I mean, if you have 80 tons of gold, it's not that big. is really not that big, can stay in a small room, but Like if you have like $10 billion of silver, good luck with that.
Ryan:
[1:06:47] Well, what is that stat? It's all the gold in the world is an Olympic-sized swimming pool full, basically. So, I mean, it's not all that much. All you need is a vault the size of an Olympic swimming pool and Tether can have all the world's gold if you guys get there. Yeah. Well, this has been great, Paolo. I think people are really understanding the size of Tether and the scope of your ambitions and all the ways that you're involved. I want to go back to this thread that you mentioned, which is the Genius Act, full circle. So you said that the Genius Act in the U.S. Could be a template for countries all around the world. I haven't actually kept up with the latest kind of crypto stablecoin legislation in Europe, the Mika type stuff and what's going on there. Like, how's that going? And do you think Genius Act, the principles and ideas behind Genius will filter into Europe? Where do you think we go from here in the rest of the world?
Paolo:
[1:07:35] I wish that the, you know, I'm European and I'm allowed to say, you know, true things about Europe. And so the problem with the Mika license is that it requires 60%, minimum 60% of assets in uninsured cash deposits in a bank. Means that in the US, the insurance on deposits is $250,000 and in Europe is 100,000 euros. You know, think about, again, Silico Valley Bank 2023, our main competitor, had an issue because the bank went bankrupt while having an insured cash deposits in the bank, around $3.3 billion.
Paolo:
[1:08:13] Imagine having 60% of an insured cash deposits if you are a stable coin. That is very bad. We argued before the MECA became low that you should have 100% in treasuries. So that's why the Genius Act gets it right. You need it's much more solid requirement because you know it's it requires basically or well if you want and if you are like a stable coin you should be able to get 100% in treasuries or 90% but I don't want to have 40% treasuries that would make my product weaker and and actually what the Mika license says that is that you cannot have like you need also
Paolo:
[1:08:58] You need to diversify a lot in corporate bonds or sorry in government bonds that you can buy in Europe like in Europe you don't have you cannot count on too many fingers the strong countries that have good treasuries you know not all the countries in europe and well they are all very far from being the united states and have very good treasury bonds so what i aim and what i hope well more name is to see like more the genius act becoming the template maybe will push europe to change the requirements because in a certain way i think that europe might not be a comparable regime to the United States if they keep these requirements of minimum 60% in an insured cash deposit. But everything else, everywhere else, I think they will mimic what the U.S. is doing. Maybe they will change a little bit, someone will say 90%, someone will say you have a slight lower composition of us, but they all will take the U.S. Genius Act as a template and will make, will make, you know, they will try to get this comparable approach.
Ryan:
[1:10:08] Paolo, when it comes to the euro, though, and a euro stablecoin itself, outside of the dollar kind of backed stablecoin, do you think Europe is going more in the direction of a, you know, sort of a EU central bank digital currency rather than the US direction, which is like, hey, we're just going to let private industry kind of roll out our stablecoins. That seems to be the direction maybe they're taking, though. It's hard to tell. Sometimes the EU is very, very opaque on like what's going on inside.
Paolo:
[1:10:35] I think that they want to do full on CBDC, which is not great in my opinion. So first of all, the EU is scared of dollar stable coins. So they want to limit the circulation as much as they can because, you know, they feel the fear, the uptake of the US dollar against the euro. The thing is, if you go outside the United States, you stop 1000 people in the streets, You ask them Would you prefer your national currency or the dollar? Everyone will say Not even one person will say I want my national currency Everyone will say I want the US dollar Go outside Europe And ask Stop one dozen people And ask them Would you prefer the euro Or your national currency?
Paolo:
[1:11:13] People don't know what is the euro outside of Europe and they would prefer their national currency. So not even Europeans want the euro. So imagine the others. And so in my opinion, the Europe is trying to do protectionism to their currency, might be fair, but I am not a big fan of having a central bank digital currency because I think that what happens now with the credit cards and debit cards, There is a layer between yourself when you spend the money and the state. So the bank, the intermediary act as a middleman, right? So the state cannot track you or geolocate every single transaction that you do. Like you spend the digital euro in a bar in Milan and the central bank would know it. That is too much in my opinion. And we have seen sometimes that Europe is going crazy and deciding that free speech is not an option anymore and should be reduced and all that. So it's like if you control the money of people, you might eventually use that power to seek obedience.
Ryan:
[1:12:25] Paulo, this has been great. I'm wondering if you could just leave us with this in summary as we close out. So, I mean, Tether has had kind of a lot of narrative ups and downs, let's say, with the U.S. government, right? There are times when Tether has been criticized in all sorts of ways. It's also even had its ups and downs in crypto. I mean, there's been a lot of narrative FUD about Tether in the past. I feel like this is almost 2025 is sort of a redemption a year for Tether. It feels like none of that FUD is happening these days. even U.S. Lawmakers are recognizing like what Tether is, how big it is, and the value it's bringing to the U.S. Treasury bond market. I want you to summarize this. Why is Tether, in your words, good for the U.S., and why is it good for crypto?
Paolo:
[1:13:07] So Tether is good for the United States because, first of all, we are bringing financial inclusion through the U.S. dollar to hundreds of millions of people. There were charities and NGOs that raised a lot of money from everywhere else in the world and everywhere in the world to try to solve financial inclusion. A small company like Tether was able to bring financial inclusion to almost 500, half a billion people. And we are doing that with the U.S. dollar.
Paolo:
[1:13:34] Second, we are spreading with that the US dollar hegemony. So when you have China, when you have all the other BRICS countries trying to undermine the US dollar hegemony, we are helping, we are actually the company that is helping the US the most out there. When we are in Africa, when we are in Central South America, you don't see the presence of the United States much, but you see the presence of the BRICS countries, they're trying to undermine the US dollar and you see the presence of Tether with millions of touch points we are trying to push back and we are pushing back and we're making the dollar the preferred currency the most used currency there in these countries and third we are the biggest well among the biggest purchasers of u.s treasuries and u.s debt and i think that when you have china that is using that is selling three years ago china had two three hundred dollars of u.s debt and now has less than 700 billion dollars and can could use that as a weapon against the united States. You want to decentralize the ownership of the US debt, as I said.
Paolo:
[1:14:34] And we're helping the United States through that. We think we're doing a good job. I think the Genius Act will help us to continue to do so in a stronger way.
Paolo:
[1:14:44] And we are invested in the United States. As I said, we invested a lot of the portion of our profits back in the United States, support very good companies in the United States. So I think that there is a very strong alignment between in tether and the united states we keep our treasuries in the united states not in a random european bank so everything that we do ties back to the united states so i i'm you know i i think we are we're doing a good job when it comes to crypto it's funny because yes there was a lot of fud but you know if you bring back the chart you could see that you know fud is one thing but facts are different right so the the chart is pretty much growing all the time there you
Ryan:
[1:15:23] Go paulo thank Thank you so much for joining us today. This has been fantastic.
Paolo:
[1:15:27] Thank you very much for your time and for the opportunity.
Ryan:
[1:15:29] Thank you, guys. Heather, taking the U.S. dollar to everywhere banks in the U.S. can't go. Got to let you know, Bankless Nation, of course, none of this has been financial advice. Crypto is risky. You could lose what you put in, but not on stable coins. We're headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the Bankless journey. Thanks a lot.
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