Compilation | Wu Talks about Blockchain

This article is based on an interview with Tether CTO Paolo Ardoino on the Bankless podcast on June 23. Some information may be outdated.

In this episode, he gave a detailed introduction to Tether's global business layout, profitability, attitude towards the GENIUS Act, future compliance strategies, and whether it will launch a new stablecoin for the U.S. market. In addition, Paolo also shared Tether's investment directions in Bitcoin mining, AI, biotechnology, agriculture, energy and other fields, and responded to many discussions about Tether's market value and strategic positioning.

When this episode was recorded, the US GENIUS Act stablecoin bill had just passed the Senate and was likely to be signed into law by Trump. As the largest stablecoin project in terms of market value, Tether faces a new policy environment and market competition. Hosts Ryan Sean Adams and David Hoffman had an in-depth conversation with Paolo on this, focusing on Tether's preparation for compliance, the global distribution strategy of the US dollar stablecoin, and its positioning adjustment in the US and global markets.

Paolo Ardoino, Tether's long-time technical director, responded to several key issues in this episode, including Tether's relationship with the U.S. Treasury, its Treasury bond holding strategy, and its claim of nearly $14 billion in profits last year.

Please note: The views of the guests do not represent the views of Wu Shuo. Wu Shuo does not endorse any products or tokens. Readers are requested to strictly abide by local laws and regulations.

How will Tether respond to the GENIUS Act? Will it spin off and launch a local stablecoin?

Ryan: Welcome to Bankless, where we explore the frontiers of stablecoin finance. I'm Ryan Sean Adams, and I'm joined by David Hoffman, and we're committed to helping you live a less bank-dependent life. There's a "Game of Thrones" going on in the stablecoin space right now, and Tether is the undisputed stablecoin king. So our guest today, Paolo Ardoino, can be said to be the "King of Stablecoins." Although he seems to be very low-key himself, he has ambitious plans for Tether's continued distribution and dominance, which is especially important in a new era - an era that has just passed the GENIUS Act and the stablecoin bill is entering the next phase of Congress. The bill has passed the Senate and is likely to be signed by Trump.

My biggest question for this episode is: Assuming the GENIUS Act is passed, what will Paolo do with USDT and Tether next? Will he choose to go the compliance route, or will he launch a new US-based stablecoin and split the business in two? The answer sounds like "both", but it's also very nuanced and complicated. You have to listen to know the full story. He also said a number that almost made us fall off our chairs: Tether made nearly $14 billion in profits last year.

David: We welcome Paolo Ardoino again, the core leader of Tether, a $150 billion stablecoin project and a pioneer in this industry. The last time we spoke was before the GENIUS Act was introduced, and there was no news about legislation on Capitol Hill. Now that this major bill has passed the Senate and is ready to go back to the House for further progress. We have a lot of topics to update. Paolo, welcome back!

First Response to the GENIUS Act and Tether’s Compliance Preparation

David: I want to first hear your first reaction to the GENIUS Act passing the Senate. Although the bill still needs to be returned to the House of Representatives for further voting, people are generally very optimistic. Trump even tweeted, "I just want to sign this bill, the House of Representatives, get it done quickly." What was your first reaction when you heard the news?

Paolo: As you know, Tether pioneered the stablecoin industry in 2014, and we are honored to see that the most powerful country in the world, the most powerful government, is taking seriously the technology we created 11 years ago and recognizing it through legislation. This is very exciting. I think the GENIUS Act is an important step in the right direction, which establishes a compliance framework for both local stablecoins and foreign stablecoins like USDT. Of course, as you said, it still needs to pass the House of Representatives, but the atmosphere now looks positive. This bill sets a high bar, especially in terms of anti-money laundering and compliance, and I really appreciate this standardized approach.

A few months ago, I announced that we were promoting a localized stablecoin project in the U.S. The passage of the GENIUS Act provides a clear path and requirements for such projects, and we believe that Tether USDT itself is already in a good position to meet the requirements through a "comparable system" approach.

There was another important news yesterday that Tether is cooperating with the US Department of Justice. We have continued to use our self-developed monitoring technology over the past year to identify and track suspicious activities on the chain. I think we have built the strongest stablecoin monitoring system in the entire blockchain ecosystem.

These examples show what Tether is doing. We work with over 250 law enforcement agencies around the world, in over 55 countries. This is unprecedented among financial institutions. We are willing and continue to push for higher transparency and standards. The requirements set out in the GENIUS Act are exactly what we have been doing.

From a financial perspective, this bill also sets a high bar. No one wants to see another Terra Luna disaster. Tether holds over $125 billion in U.S. Treasuries and that number is growing. Our monetary base is expanding, which shows that we are moving in the right direction. Strong balance sheet requirements are necessary.

Currently, Tether's total group equity is about $176 billion, and the market value of the USDT stablecoin is $155 billion. In addition to our 100% USDT reserves, we also retain about $6 billion in excess reserves. Compared to traditional banks, which usually only retain 10% of liquid assets and implement a 90% partial reserve system, Tether has more than 105% full reserves. In addition, our group has an additional $15 billion in assets. This structure is extremely rare in the financial system.

So overall, we are very excited about this bill. Of course, the final version needs to be released before we can move forward with our stablecoin issuance plans in the United States. But I applaud Senator Cynthia Lummis and other members who pushed for this legislation.

After the passage of the GENIUS Act, Tether’s strategic planning and expected impact on the industry

David: Assuming the GENIUS Act passes in its current form, what new doors will it open for Tether? What will happen next? What is your strategy after the bill passes? In addition, is there anything you feel is missing from the GENIUS Act? If it could be amended, what provision would you most like to see added?

Paolo: I think the GENIUS Act will provide much-needed clarity to the entire industry, allowing everyone to operate more safely. For the past four years, our entire industry has been in a hostile environment, not just Tether. That period was called "Operation Choke Point 2.0", and the OCC and the executive branch were suppressing the crypto industry. Crypto banking was almost impossible. You remember in 2023, Silicon Valley Bank and Silvergate Bank had problems one after another, which almost eliminated our main competitors. All of this is a direct consequence of Choke Point 2.0.

Now, the new administration is developing a new regulatory framework, showing the federal government and regulators' support for crypto banking. This will greatly improve the security of the entire industry, and we are very excited about it.

In addition, the GENIUS Act also provides opportunities for more new players. For example, now we see JP Morgan, Amazon, Walmart, etc. are all expressing their desire to issue their own stablecoins. Now every big company wants to issue its own stablecoin, which I think is great, the more players the better. As I said on X, "welcome the second player." But what's interesting is that these new competitors are mainly focused on the US market. And I would say that the opportunity in this market is actually very short.

Ryan: I do think Tether has done a great job outside the United States, especially in expanding the number of stablecoin users and usage scenarios. These indicators do reflect your efforts.

Is USDT seeking compliance? Why is there a need to launch a US-based stablecoin?

Ryan: Paolo, I want to know more about your specific plans after the GENIUS Act passes. Now Tether seems to have multiple paths to take. Let's assume that this bill does pass. I was looking at Polymarket this morning and the probability there is already 80%, which is the highest so far.

I think back to the last time we spoke to you in February 2024, the regulatory environment was completely different than it is now, especially in the relationship between the United States and the crypto industry and stablecoins. It was the height of the "Choke Point" action.

We just spoke with Senator Bill Hagerty, co-author of the GENIUS Act, yesterday, and he specifically talked about Tether. He said that if an offshore issuer like Tether wants to enter the US market, the bill allows the Treasury Department to conduct a "comparable system" test, and if its home country's regulatory rules match those of the United States, it can continue to operate. Otherwise, it needs to establish a US subsidiary and meet the same reserve and information disclosure standards. He also said that Tether can start the compliance process tomorrow.

Can you elaborate on Tether's plans? USDT does not currently meet U.S. regulatory standards, but there does seem to be a path to compliance. Achieving this path may require stricter audits, optimizing reserve structures, increasing local operations, or obtaining an OCC license. At the same time, we also know that you are promoting a new local stablecoin project, which will be a completely independent asset from USDT and focused on the U.S. market. Are you worried that this will split liquidity? Can you talk about your considerations in more detail?

Paolo: Yes, the market is paying attention to the $13.7 billion profit we made last year. This year I think we can do even better. Our current market value is $155 billion, and the Fed did not cut interest rates as much as many people predicted, which we said a long time ago, and it did happen.

Why do people think we can't meet regulatory requirements? I'm not saying you think so, but I see a lot of similar comments on X. They think we will abandon the US market and no longer support the best business in the world. But why do they think so? We are profitable enough, in fact, except for a few countries, we are now one of the largest buyers of US Treasury bonds. Last year we were the fifth largest buyer of US Treasury bonds.

Ryan: Many people may not know that Tether is the fifth largest buyer of U.S. Treasuries, which is ranked on par with those national purchasing powers.

Paolo: Yes, we are the 18th largest "national" Treasury holder in the world in terms of total holdings, even though we are not a country. That's the power of stablecoins. I think Treasury Secretary Janet Yellen fully understands this, and the President understands it too. USDT is an important boost to the U.S. economy.

As Senator Hagerty said, there is indeed a path to a “comparable system” or mutual recognition system. This process may take some time because countries need to establish corresponding regulatory mechanisms. But I think the greatest value of the GENIUS Act is that it will become a template for other countries around the world to follow.

The United States is the most influential country in the world, so once it passes the GENIUS Act, other countries will follow suit. At present, except for the UAE, the system in Europe is actually very bad - for example, it requires 60% of reserves to be placed in uninsured bank cash accounts. Do you remember what happened to our competitors when Silicon Valley Bank got into trouble? Europe has such a bad system. And the UAE is already doing something similar to the GENIUS Act, and Singapore is also testing the waters. So I believe that once the United States legislates, other countries will soon follow suit, which will open up a clear path for the global compliance of USDT.

The division of labor between the two stablecoins and the profitability challenges in the US market

Ryan: Regarding the USDT question, it sounds like your main plan is to make USDT compliant with the GENIUS Act. If that's the case, why issue another stablecoin in the US? Why two? Is this for redundancy? Or is it a backup plan?

Paolo: This is a great question. In fact, these two are aimed at completely different use cases. My opinion may be controversial, but I think the current stablecoin business model does not work in the United States. Of course, everyone is paying attention to Circle's IPO, and many projects are preparing for business in the United States, but to be honest, it is almost impossible to make money with stablecoins in the United States, and it will evolve into a "price war to the end" in the future.

You can see this from the example of crypto exchanges. Bitfinex earned 20 basis points in fees for each transaction in 2012. But now you can see that the market maker’s fee is only one basis point, which is a significant drop from ten years ago. This is the result of “overefficiency”. The United States is one of the most efficient markets in the world in terms of financial infrastructure, having reached an efficiency level of 90%. If you introduce stablecoins in the United States, you can only increase the efficiency from 90% to 95% at most, which is not very attractive to users, and the “premium” they are willing to pay for it is very limited.

But in countries like Nigeria, the efficiency of the financial system may be only 20%. If you introduce a stablecoin, you can increase the efficiency to 50%, which is a 30% increase. So in these countries, users are happy to hold USDT, even if they only get an annualized return of 4%, which is better than the intraday depreciation of their national currency.

Therefore, I think we need to clearly distinguish between these two products and their respective use cases. For the United States, future stablecoins will be more like "Tokenized Money Market Funds", such as JP Morgan's JPMD product, which will eventually return all profits to users.

Therefore, the local stablecoin we plan to issue in the United States must compete in other dimensions, such as programmability, additional services, etc., and must not compete with our original business model for USDT. USDT was born for emerging markets around the world, while local stablecoins serve the United States. The two cannot be confused.

Facing competition from banks and technology giants, what is Tether's moat?

Ryan: Got it. So you are indeed considering launching two products because they serve different use cases. But at the same time, you do intend to make USDT compliant with the GENIUS Act, right?

Paolo: Yes, that is exactly our goal.

David: There are more and more discussions about domestic stablecoin issuers in the United States. There are many rumors that Amazon, Walmart, and even Meta and Twitter may issue their own stablecoins. We also know that JP Morgan, Citibank, and Wells Fargo are also exploring similar stablecoin alliances. I personally think this is a bit like a "psychological placebo", but this is just my personal opinion. In the future, there will be a large number of competitors in the United States. If these large banks can issue tokenized deposits anchored to the Federal Reserve balance, then five years later, what moat will Tether still have?

Paolo: Tether still has very strong distribution partners and its own distribution network. The key is that banks usually only sell their stablecoins to their existing customers. I don't see any bank employees willing to go to the streets and educate ordinary people one by one on how to use stablecoins. This is exactly our strategy all along.

We never walk into a country and go straight to the biggest bank, which is completely different from our competitors. We educate on the streets, promote in the community, hold educational seminars, and popularize knowledge door-to-door. We look for local partners who fully align with our "bottom-up" philosophy. This is how we advance stablecoins.

Although the financial infrastructure in the United States is very complete, I recently saw a report saying that many people have difficulty opening a bank account. Therefore, there will be a group of people in the United States who need our "direct-to-user" products, rather than those that can be served by traditional institutions sitting in ivory towers and thinking that the world is the same as 20 years ago.

What do you think of Circle's valuation after its IPO? Will Tether consider an IPO?

David: I want to talk about the stock price of Circle after it went public. It was issued at $31 and has now risen to $200. I saw someone do a simple valuation calculation on Twitter. If Tether is estimated using a similar price-to-earnings ratio, its valuation is about $3 trillion. What do you think of the stock price performance of Circle after its listing? I think it's amazing.

Paolo: First of all, we don't plan to go public. Generally, companies choose to go public for two reasons: one is to raise funds, but we are very profitable and don't need it at all; the other is to allow shareholders to exit. In the past two years, we have invested more than $5 billion in the United States with our profits. This is rarely mentioned, but it is actually very important. We are also giving back to the country that created the powerful currency of the US dollar.

You go public to get capital more cheaply or to get shareholders out. We don't need that. We're having a lot of fun right now. It feels like the company is just getting started. There's a lot to do and a lot to expand into. We have a lot of new ideas around the concept of USD to drive disruptive innovation in different verticals — for the masses rather than for a few big companies.

So when I see that multiple for Circle, I also think, that's a good valuation multiple. Of course, valuation is ultimately a matter of the market, and we'll see. But for us, this situation is already very good.

David: Let's go back to Tether's current position as a country in terms of holdings of US Treasury bonds. Combined with the potential valuation of several trillion dollars, does this scale and influence make you feel stressed? If I were you, I would probably feel a lot of pressure to manage so much US Treasury bonds and even operate like a "country".

Paolo: This does involve a lot of misunderstandings. Some people are still living in the public opinion of 2014 and still think that Tether is something that needs to be hidden. But we actually keep our assets in Gerald's formal custodian, and everything is open and transparent.

Ryan: I think a lot of investors are trying to figure out how much the stablecoin track is worth. You can see that Wall Street is already trying to estimate the value of Circle, stablecoins are really starting to enter the public investment field, and Tether has finally been put in the spotlight. For example, Treasury Secretary Janet Yellen recently realized that Tether is an important buyer of U.S. debt.

Ryan: Let's compare. Circle's market value is about $45 billion, and its annualized net profit is about $150 million. You just mentioned that Tether made $13 billion in profit last year, and it will be even higher this year. The $3 trillion valuation that David mentioned does sound exaggerated, but based on your cash flow, it's not a fantasy to be in the top five - second only to NVIDIA, Apple, and Microsoft. And your U.S. debt reserves are also very strong. This comparison now makes sense because you have a real comparable object, and that company is now a listed company. So how much do you think Tether is worth today?

Paolo: For me, it’s worth a lot.

Ryan: Haha, that's exactly what I meant.

Paolo: Yes, for me personally, it's very valuable because it's like my baby. But to be honest, I don't know if a 200 times P/E ratio like Circle can be sustained in the long term. If they can, that's great, and it's good for us too.

We have come a long way, and have experienced highs and lows, but many people have always been determined to keep going and build this company despite the difficulties. So I want to say that this is an achievement that belongs to everyone and deserves congratulations.

The Second Half of the Stablecoin War: The Next Phase of Distribution Strategies

Ryan: Let's talk about the second half of the stablecoin competition. Now we can say that Tether won the "first phase", which was the era dominated by crypto-native users. The passage of the GENIUS Act means that we are entering the "second phase". David mentioned that many American companies, including banks, are planning to enter the stablecoin track. These will become your new competitors. Welcome to this new battlefield. Now, banks are starting to participate, and so are technology companies, such as Meta.

I saw an interesting article about stablecoins by Arthur Hayes. He pointed out that the core of stablecoin competition is actually the "distribution network". Tether was the first player to enter this field and took the lead in establishing crypto-native distribution capabilities. Tron is a very good distribution channel. The circulation volume of your Tron has reached 80 billion USDT, and the usage scenarios and payment scale are very impressive.

The next question is, in the next stage, you will face big technology companies, such as Meta. Meta has more than 3 billion global users. This will be a whole new chapter. In this situation, how can Tether continue to win the distribution war?

Paolo: This is a very interesting topic. We still need to observe the final language of the GENIUS Act, but from the current point of view, it may be difficult for companies like Meta to launch stablecoins on their own in the future.

I think big tech companies will eventually need to work with existing stablecoin issuers or small banks to support stablecoins issued by others through agency issuance or revenue sharing. This model will bring about an interesting competitive landscape. I still think that there is limited room for companies like Meta to issue stablecoins themselves.

In terms of distribution, Tether has made a lot of arrangements. More than 100 companies have accepted our investments through Tether Investments instead of using our reserves to invest. These investments have formed our huge distribution network.

For example, Rumble, a stablecoin product in the United States, will launch Rumble Wallet, which will have 70 million users at the beginning. This is a very good starting platform, even more active users than the largest crypto exchange in the United States, which is obviously a very advantageous starting point.

We also have the USDT Dot Network website, which publishes data on our user behavior, such as 37% of users use USDT for savings. We are very in-depth in the construction of the distribution network, and it is a "down-to-earth" model. We can even penetrate the smallest village in the Philippines.

We have invested in cross-border remittance companies, set up service points in Central and South America, and built digital currency infrastructure in Africa, where we have also launched a pilot project to build 500 stablecoin exchange kiosks.

Ryan: I was shocked to hear you share this data, all of this information can be found on USDT dot Network, right? 4.4 million estimated users, I think the United States as a whole is completely unaware of the scale of this use case. People keep saying that there is no "killer app" for crypto, but your data shows that 440 million people actually use USD, which is the real killer app.

Behind the explosive growth of Tether users: How does the epidemic accelerate the use of stablecoins in developing countries?

Ryan: How did the first phase of Tether distribution come about? This can’t be a completely emerging market story, right? Can you explain to people who are seeing these numbers for the first time how they came about?

Paolo: Actually, this is an interesting question. If you look down at our market cap growth chart, you'll see what happened in 2020. Do you remember what happened that year?

Ryan: We’ve had a global pandemic, you mean that?

Paolo: Exactly. And we didn't have a marketing team at the time. We didn't really set up a marketing department until 2022. If you look at the growth between 2020 and 2022, we didn't really understand why there was such a change until later. We did a lot of self-reflection and asked ourselves a lot of questions.

If you think about developing countries, they have several common characteristics. First, they are generally poorer; second, their inflation rates are generally higher than those of developed countries. But more importantly, they have two other important characteristics: first, the penetration rate of smartphones is actually very high, and the degree of digitalization is not low; second, the population is obviously younger, with a large number of young people.

From 2017 to 2020, this generation of young people was the first group to come into contact with and understand cryptocurrencies. However, the situation changed significantly when the pandemic broke out in 2020. The parents of the "children" who originally understood cryptocurrencies began to take to the streets because of unemployment and economic collapse due to the pandemic. Compared with the United States or Europe, the economies of developing countries have been hit harder, with more severe unemployment and higher inflation.

Ryan: So what applications do they use to use USDT? Is it a traditional crypto exchange application? Or a wallet like MetaMask that connects Ethereum and Tron?

Paolo: Mainly local exchanges and various wallets - there are really endless varieties. We never say "you must use this wallet" or "recommend that wallet". This is the point - when people really need it, they will naturally find a solution. This is also the problem in Europe and the United States. People's needs are not urgent enough.

When your family is in danger, you work hard all year and end the year poorer than you began the year, just because your currency is depreciating too fast, you will do whatever it takes to protect your family. This is the reality we see and the real reason behind the explosive growth of Tether users.

Is USDT’s growth still strongly correlated with the crypto market?

Ryan: How much do you think the growth of Tether's market cap correlates with the total market cap of the entire crypto market? It does seem like there is some correlation, like there was a big surge before 2022, then it dropped, though it didn't fall back, and then started growing again. Do you think there's a causal relationship?

Paolo: To be honest, we are actually collecting data in this regard, but from what we have observed so far, the portion of Tether's market value that comes from the crypto market is conservatively estimated to be less than 40%. In other words, more than 60% of the growth comes from real usage demand in emerging markets, which is the demand for US dollars at the "grassroots" level.

I think the next wave of USDT growth will come from the commodity trading sector. Almost all commodity traders are contacting Tether because, for them, USDT is the great invention "second only to sliced bread". They need to make international settlements, but the traditional banking system is extremely inefficient, and for these traders, the capital efficiency is very poor. USDT can make their settlement process almost infinitely efficient.

You have to know that the main export destinations for commodities are mostly in emerging markets.

For example, look at Bolivia. I tweeted about Bolivia last week. In small shops in Santa Cruz and other cities, the prices of goods are directly marked with USDT. We never set up an office in Bolivia, never sent people there, this is all user-generated. It's completely organic growth.

Tether Ventures’ investment strategy and global agriculture and energy layout

David: I want to turn the topic to Tether Ventures. You have made a lot of arrangements in this area now, and there are many interesting projects in Tether's portfolio. Some are very intuitive, such as Plasma and Stably, which are L1 blockchain projects built specifically for Tether.

But your investments also cover some more "discrete" areas, such as the acquisition of mobile communication networks, fiat currency deposit and withdrawal infrastructure companies, and energy startups. There are even some media technology companies that help creators produce content. I heard that you also own an Italian football club? These investment portfolios are quite interesting. Can you talk about the strategy behind Tether Ventures?

Paolo: Yes, our portfolio is indeed large, so we have to develop different strategies for different areas.

We have also recently started acquiring land and agricultural companies. For example, a company called Adecoagro, which is listed in the United States, is one of the largest landowners in South America, with land in Brazil, Argentina and Uruguay. Their main business includes agricultural production, such as rice and beef.

The reason why we value this type of asset is first because land itself is a scarce and safe asset with the potential for long-term appreciation. As part of asset allocation, investing in resources that humans will always need, such as land and agriculture, is a very sound strategy.

More importantly, we believe that agriculture is also part of commodity trading, and can be combined with the use of stablecoins in commodity trading as we mentioned earlier. USDT and other stablecoins can help agricultural companies improve capital efficiency, whether it is financing or commodity payment, it can be faster, more transparent, and decentralized. Therefore, the combination of agriculture and stablecoins will be a very promising direction.

Another interesting idea is that we are losing the ability to "think independently". Many people can't even do simple mental arithmetic because we have calculators. The development of AI may make us more dependent on "intelligence". Just like the saying "Not your keys, not your coins" in the crypto industry, I think there may be a concept like "Not your AI, not your intelligence" in the future.

If you hand over all your data to a company that controls your intelligence, then you are not actually getting smarter, but becoming more dependent, or even duller. And those companies that have your data and "intelligence" will become more and more powerful. This trend deserves our attention.

Decentralized AI platform and data sovereignty vision: “Not your AI, not your intelligence”

Paolo: Based on our current balance sheet strength and our unique combination of technology and capital, we want to build a technology platform that makes AI more accessible to the public. This SII (decentralized intelligent interface) platform can run on all devices, whether it is a $30 cheap smartphone, a high-end flagship, a laptop, or a server, and it can automatically adapt to the model, weights, and other parameters used.

We have also invested in some biotech companies, such as Blackark Neurotech, which has nothing to do with Blackrock, although we may consider changing the name. We are particularly interested in brain-computer interface technology, which I think is the ultimate line of defense for humans against being "ruled by robots". In the future, if humans want to become smarter, they will need some kind of "mathematical coprocessor" implanted in their brains, but it cannot upload all your thoughts to OpenAI or other big companies.

This is why I came up with the idea of “Not your AI, not your intelligence”. I am looking forward to the future of combining local computing intelligence with brain-computer interfaces. I am a big science fiction fan.

You mentioned that we invest in football clubs. Yes, we do invest in Juventus in Italy. Yesterday, Juventus won the first game of the World Club Championship 5-2, which is a good start. Giancarlo and I are both football fans. This investment is actually small relative to our entire portfolio, but it is indeed a lot of fun.

David: Is this investment just for fun?

Paolo: Yes, a little bit for fun. But if you think about it, this could also become a huge distribution channel. Juventus fans are all over the world. We can bring more fans to Juventus through our own network, and at the same time, we can use Juventus' influence to expand our user network. This linkage is actually very potential.

Core of investment strategy: Prioritize the evaluation of distribution potential and promote AI wallet SDK (WDKS)

David: In the long term, when you evaluate a potential investment, is distribution the first thing you consider? Do all your investments prioritize distribution capabilities?

Paolo: Absolutely. Even as we build our AI platform, distribution is still the first priority. I believe we will see 1 trillion AI agents in the next 15 years, and each of them should have a custodial wallet. It is hard for me to imagine my AI agent opening an account at the Federal Reserve or JPMorgan Chase.

Therefore, we are building an SDK called WDKS (Wallet Development Kit for Smart agents), which is a completely open source wallet development kit that anyone can use to build a non-custodial wallet. We will not hold any private keys, it supports various blockchains, and you can use any AI model to integrate the wallet.

My vision is this: I have a smart refrigerator that displays a QR code that links to a non-custodial wallet. I deposit $50 into the refrigerator and it helps me shop for groceries. I don't want the money in the refrigerator to be stored in PayPal, that's not the experience I want.

And imagine billions of devices needing this functionality in the future. I even imagine that in 20 years, every light bulb will have a micro AI that can adjust the optimal brightness and energy consumption based on environmental conditions. Maybe not in 20 years, maybe in 30 or 40 years, but this is where we are going.

This is why we are building localized AI. I don’t think every light bulb should be connected to ChatGPT, the system will definitely crash and the latency will be very high. Local AI will become very important, and giving local AI its own wallet will also become very critical.

Will not launch "Tether Chain", but support multi-chain high-speed payment infrastructure

David: Some of Tether’s recent investments that have attracted attention in the crypto community include Plasma, Stably, and a number of Layer 1 blockchains built specifically for Tether. In particular, Tron’s transaction fees have recently risen to $4-5, which is obviously not feasible as a payment chain. So projects like Plasma and several others are trying to build a payment blockchain specifically for Tether. Tether has invested in these projects. Do you plan to turn one of them into a "Tether Chain"? Or what do you think of these high-throughput blockchains designed specifically for Tether?

Paolo: Tether will not launch the so-called "Tether Chain", and I don't think there will be such a chain in the future. But there are indeed many great teams and projects building excellent ecosystems, and we are willing to invest and support them.

You mentioned that some chains have seen fee increases, but fees fluctuate, sometimes they are high and sometimes they are low. I imagine that there should be a user experience in the future that we can integrate into some wallets. Tether may launch its own wallet by the end of this year - I have never mentioned this plan before.

Ryan：Will the wallet be launched on a specific network? Or will it support multiple chains?

Paolo: It will support all networks. We hope that this wallet will be equipped with WDKS (Wallet Development Kit for Smart agents), and anyone can develop a similar wallet based on this framework. We are not trying to make money from this wallet. In fact, I don’t even want to launch a wallet, but I want to make sure that there is a truly excellent wallet product on the market.

David: Speaking of Plasma, this chain has attracted a lot of attention on crypto Twitter. It is actually a Bitcoin sidechain. Before Tether exploded on Ethereum, it was actually first deployed on the Omni network, which is a Bitcoin sidechain. It can almost be said that it was the first chain built for Tether, at a time when the entire industry had not really understood blockchain technology. So now it is back to the Bitcoin sidechain, which feels a bit like "reincarnation".

The relationship between Tether and Bitcoin: Holders and believers, the origin of stablecoin development

David: Tether started out as a stablecoin on Ethereum, then expanded to multiple blockchain networks, and is now incubating some “Tether Chain”-like projects, including a Bitcoin sidechain. How do you view the relationship between Tether and Bitcoin? Do you think Bitcoin is special? Is it just another chain? You obviously hold a lot of Bitcoin and are bullish on it — what comes to mind when you think about Bitcoin?

Paolo: I love Bitcoin very much, and our entire team loves Bitcoin. It is Bitcoin that brought us into this industry. The birth of Bitcoin is poetic.

Many people say that it is too slow to produce a block every ten minutes. Yes, it is indeed slow, which is why you see the emergence of various Layer 2s, such as Lightning Network, or new architectures like Plasma. My point is that you should not use the Bitcoin mainnet directly for daily payments.

But Bitcoin's "true removability" is important. With a block size of about 1 to 4MB every ten minutes, even if you are in a village in Africa, you can download several megabytes of data in ten minutes with a simple antenna. This means that Bitcoin is currently the only blockchain that can achieve truly decentralized access even in the most remote areas. If the blocks were more frequent and larger, it would be difficult to keep up with the blockchain in developing countries.

Ryan: This is also in line with your treasury investment strategy. Tether holds about 100,000 bitcoins in its treasury. Do you think you will consider allocating other crypto assets in the future?

Paolo: The problem is... (To be continued)

Bitcoin mining layout: Tether plans to become the world's largest miner

Ryan: What about Bitcoin mining? I remember Tether also invested in this field. Can you tell us more about it?

Paolo: Yes, Tether is expected to become the world's largest Bitcoin miner by the end of this year.

Ryan: Wait, you’re saying Tether is going to be the world’s largest Bitcoin miner?

Paolo: Exactly. There is a view about Bitcoin mining that if you have a large sum of money to invest, you have to choose between buying Bitcoin directly and investing in mining.

David: Then you will be the most consistent miner in the Bitcoin network. Because some people, like myself, are worried that when the block reward of Bitcoin gradually goes to zero, its security may decrease. But what you are saying now is that if you hold 100,000 Bitcoins and are the largest miner, then you have enough motivation to maintain the normal operation of the Bitcoin network.

Paolo: Yes, this is also one of our considerations. We are working hard to make mining deployment more decentralized. We currently have mining farms in South America and many countries, including the United States. We believe that the role of the United States is particularly important at this critical moment, and we are willing to give back and contribute. At the same time, Bitcoin also needs such firm support.

I think the future trend is that when the block reward is close to zero, the on-chain transaction fee will rise sharply. This will be a natural evolutionary path for the continued operation of the Bitcoin network.

The current status, logic and physical exchange mechanism of gold stablecoins

Ryan: Let's talk about another very traditional asset, not digital gold, but real gold. This is actually an application scenario that has existed for a long time but has recently grown in demand. Can you update the relevant data? I see that there are currently about $2 billion in gold tokens on the chain, of which Tether accounts for about 50%. Although the rise in gold prices is a factor, it seems that market demand is indeed increasing.

Paolo: I think gold tokenization is a complex but promising field. We saw a huge interest in this product last year. Tether is different from other gold stablecoins. The gold stablecoin we launched is held in physical gold in a vault controlled by Tether itself. Therefore, one reason why users choose gold stablecoins is to hedge against various risks such as potential collapse of financial markets. At the same time, you cannot be sure whether the so-called "paper gold" is really backed by physical assets. Therefore, the logic of "not your gold is not your gold" makes sense. At present, Tether holds about 80 tons of gold stablecoins and its own gold.

Ryan: The gold in your vault is part of your fiscal reserves. I saw it was about 50 tons. Are you saying it is 80 tons now?

Paolo: Yes, it is about 80 tons now.

Ryan: For those who don't know about the Tether Gold Token Product, what exactly is it? It's of course a tokenized product that represents gold, which means that there is actual gold backing it somewhere. And you control the vault and the gold yourself, right? What is the basic mechanics of this product?

Paolo: Most large gold bars are around 400 ounces, which is about 12.5 kilograms.

Ryan: Really? So you can redeem the tokens for real gold bars, physical withdrawal?

Paolo：Yes, of course you need to have the number of tokens represented by a full bar. We will not sell you half a bar.

David: You don’t do fragmented gold withdrawals?

Ryan: David is right, you either buy the whole thing or just hold it as a token on the chain. But tokenization itself can be very fragmented, right?

Paolo: Yes, absolutely no problem.

Ryan: This product is really cool.

David：Are there any other assets you plan to tokenize?

Ryan: After gold, will you consider real estate?

Paolo: The problem is, if you think about oil or silver, for example, if you think about silver, it is 100 times more bulky than gold, and because the unit value is 100 times lower, the storage cost is also much higher.

The US GENIUS Act may become a global regulatory template, while Europe's MiCA faces challenges

Ryan: The total amount of gold is not actually that large. All the gold in the world combined is equivalent to the size of an Olympic standard swimming pool. If you really buy up all the gold, then Tether controls the world's gold. This is a really great episode today, Paolo. I think everyone has a clearer understanding of Tether's size, ambitions, and the breadth of your involvement.

Ryan: I want to go back to a topic you just mentioned, which is the "template effect" of the GENIUS Act. You mentioned that the GENIUS Act may become a blueprint for legislation in other countries. I am actually not very clear about the current progress of Europe in cryptocurrency legislation, especially stablecoin legislation, such as the development of MiCA (Market Regulation for Crypto Assets)? Do you think the ideas behind the GENIUS Act will be transmitted to Europe? How will the global regulatory landscape evolve in the future?

Paolo: I hope so. As a European, I can also speak some truth. The problem with MiCA is that it requires stablecoin issuers to keep at least 60% of their assets in uninsured cash bank deposits. The deposit insurance limit in the United States is $250,000 and in Europe it is 100,000 euros.

Paolo: Think about the bankruptcy of Silicon Valley Bank in 2023, where our main competitor suffered significant losses because it had $330 million deposited in the bank, and those funds were actually not insured.

Paolo: So you can imagine how dangerous it is if a stablecoin project keeps 60% of its funds in such an unsecured bank account. We proposed before the MiCA legislation that 100% of the reserve funds should be used to purchase government bonds. The GENIUS Act obviously does a better job in this regard, requiring stronger asset security. It stipulates that stablecoin issuers must be able to achieve 100% government bond coverage.

Paolo: So I hope and expect to see the GENIUS Act become a global template. Maybe it will push Europe to modify existing regulations. If Europe continues to insist on this unsafe reserve requirement, their regulatory system cannot be considered "comparable" to the United States. And other countries, I think, will use the US GENIUS Act as a reference. Some may set a 90% national debt ratio, some slightly lower, but the direction will definitely be closer to the United States.

Why does the EU not welcome the US dollar stablecoin? The contradictory path with the central bank's digital currency

Ryan: What about the euro? In addition to the US dollar stablecoin, what do you think about the development direction of Europe's own euro stablecoin? Do you think the EU will be more inclined to launch the European Central Bank's digital currency (CBDC)? This seems to be different from the US direction of "letting private companies launch stablecoins." Of course, sometimes it is difficult to see the direction of European policy, and the EU's decision-making process is indeed quite opaque.

Paolo: I think they want to go all out with the central bank digital currency (CBDC), but I don’t think this is a good direction. First of all, the EU is afraid of the US dollar stablecoin, and they want to limit the circulation of the US dollar stablecoin as much as possible because they are worried that the widespread use of the US dollar will further weaken the euro.

Paolo: Look, if you go to a country outside the United States and randomly interview 1,000 people on the street and ask them whether they prefer to use their own currency or the US dollar, almost no one will choose their own currency. Everyone will say "I want the US dollar". If you ask people outside Europe whether they like the euro, most people don't even know what the euro is, let alone choose it. Even within Europe, many people don't like the euro. So you can imagine how low the euro's appeal is globally.

Paolo: From this perspective, some of the protectionist measures that Europe is taking now may be understandable. They are trying to protect their monetary system from being eroded by the US dollar. But I personally don’t like the central bank’s introduction of digital currency. Now, when we use credit and debit cards, banks act as intermediaries, standing between users and the country, playing a role of buffering and protecting privacy. If all payments are made through the central bank’s digital euro, then the country can accurately track every transaction. For example, if you spend money in a bar in Milan, the central bank can know it immediately. This makes me very uneasy.

How Tether moved from the margins to the center of the compliance stage and became a supporter of American interests

Ryan: Paolo, this has been a really great interview. I'd like to ask you to wrap up with a few words. Tether has had its ups and downs with the U.S. government in the past, and within the crypto industry as well. Tether has been subject to a lot of skepticism and criticism, and has experienced a lot of uncertainty.

Paolo: I think Tether is good for the United States. First of all, our business supports the global circulation of the US dollar.

We are actually promoting the expansion of the dollar's hegemony. While China and other BRICS countries are trying to weaken the dollar's dominance, we are promoting the dollar around the world. We are not very present in places like Africa, Central and South America, and the BRICS countries are actively deploying. But Tether's influence has penetrated every corner of these regions, and we are helping the dollar become the preferred and most commonly used currency in these markets.

In addition, we are also one of the largest buyers of US Treasuries and debt. You know, China once held $2.3 trillion in US debt, but now it has dropped to less than $700 billion. They may even use this as a weapon to put pressure on the United States. Therefore, it is very important to decentralize the structure of holders of US debt, and we are contributing to this.

I think the passage of the GENIUS Act will allow us to continue this contribution in a stronger way. We are also reinvesting heavily in the United States to support excellent local companies. Our U.S. debt is also held in custody in the United States, not in some unknown European bank. All of this reflects the deep connection between Tether and the United States.

As for the criticism of the crypto industry, I think it is just "fear talk" (FUD), but the data does not lie. Judging from the growth curve, our business has always maintained a steady increase.

Ryan: You're bringing the dollar to places that U.S. banks can't reach. Thanks for sharing today, Paolo, it's really great.

Paolo: Thank you for your time and the opportunity. Thank you.

Ryan: Just a reminder that the above does not constitute investment advice. Crypto assets are risky and you may lose money. We are heading into the unknown western frontier - this journey is not for everyone, but I am glad you have joined Bankless on this journey. Thank you again.

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