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Paolo Ardoino is the Chief Technology Officer of Tether. In this conversation, Paolo and host Pomp will discuss the rise of stablecoins, fund management, ensuring the backing of stablecoins with actual dollars, regulation and auditing, banks, FDIC insurance, and more, providing a comprehensive look at everything related to Tether and stablecoins.
The Rise of Stablecoins
Regarding the rise of stablecoins, Paolo mentions that stablecoins were initially designed primarily for cryptocurrency traders to help them transfer fiat currency between different exchanges. However, with the outbreak of COVID-19 and the devaluation of national currencies, especially in emerging markets such as Turkey, Argentina, and Venezuela, stablecoins are increasingly seen as a lifeline for developing communities.
Pomp mentions that in the face of economic instability and currency devaluation, Bitcoin has long been viewed as a solution, especially in countries facing economic difficulties, where Bitcoin is seen as a safe haven. Paolo believes that while Bitcoin is relatively new compared to other traditional currencies, it is gaining acceptance among a broader audience. Bitcoin represents ultimate financial freedom, and people need more time to understand and embrace it.
Pomp discusses the existence of multiple stablecoins backed by the U.S. dollar in the market, and Paolo believes that diversity is key when it comes to competition among stablecoins. Having multiple players in the industry not only provides users with more choices but also increases the industry's resilience and its ability to withstand various risks.
Paolo further points out that diversity presents a good case for regulatory bodies. If there's only one player in the stablecoin industry, regulatory authorities might have reasons to shut it down. However, diversity demonstrates that it's a genuine and evolving industry, rather than just one company's business.
Risk Management at Tether
Paolo explains that Tether places a strong emphasis on risk management and has a dedicated team responsible for monitoring the market and understanding the microeconomics. This team's main task is to continuously track market dynamics, ensure that Tether's investment strategies align with the market environment, and remain vigilant about potential risk factors. He emphasizes that their team is highly focused on protecting the portfolio.
Paolo mentions that in 2022 and 2023, Tether faced a series of attacks but also demonstrated its strong liquidity and redemption capability. It successfully redeemed $7 billion within 48 hours and over $20 billion in the following 20 days. Considering that $7 billion represents only 10% of its reserves and $20 billion represents 25% of its reserves, this redemption capability is remarkable. Tether met a substantial volume of redemption requests in a short time without significantly affecting its reserves.
Paolo discusses the role of FDIC insurance in stablecoins. He points out that while FDIC insurance provides some peace of mind for regular consumers, it's not a reliable solution for large companies like Tether. Tether prefers to use short-term U.S. Treasury bills because these can be returned to holders in case of bank failure.
Diversification of Tether's Investments
Regarding the sources of profit for Tether, with Tether's current market capitalization of $83 billion and over $3.3 billion in additional reserves accumulated over several quarters, Paolo states that although the current high-interest rate environment benefits Tether, it won't last forever.
Paolo mentions that Tether holds approximately $1.5 billion worth of Bitcoin in its investment portfolio. Despite having over $3.3 billion in additional capital, even if the value of Bitcoin were to drop to zero, Tether would still have more funds than the total value of all its issued tokens. Additionally, Tether also holds gold as part of its reserves.
Paolo emphasizes that the world is full of uncertainty, and Tether aims to provide additional protection to users by diversifying its investment portfolio. Given Tether's significant holdings of U.S. Treasury bills, the company is considering small-scale asset diversification.
Paolo mentions that while Tether has previously stated its intention to undergo an audit, the process has taken a long time for various reasons. He emphasizes that Tether is committed to increasing its transparency and has made significant progress in this regard.
Diversified Development of Tether
Paolo points out that Tether's goal is to support blockchain technology with practical use cases. Supporting too many blockchains can increase management complexity, especially when most of these blockchains have low transaction volumes. For example, Tether was initially issued on the OmniLayer but later started issuing USDT on Ethereum and subsequently chose to issue on Tron.
In Africa and South America, due to high Ethereum transaction fees, people prefer to use Tron. Despite the availability of more second-layer solutions like Arbitrum and Optimism, Tron remains the preferred choice for many users, providing them with simpler, lower-cost transaction options.
Pomp mentions that with the popularity of stablecoins, major banks and other financial institutions may enter this field. Paolo believes that large banks might collaborate to create a common stablecoin rather than each creating their own stablecoin. Central Bank Digital Currencies (CBDCs) could face more challenges in Western countries, as they may replace cash and potentially lead to negative interest rates.
Paolo mentions that Tether is expanding its stablecoin business and also diversifying into other areas, such as energy production, Bitcoin mining, and communication. Tether is involved in educational projects that extend beyond cryptocurrencies and encompass other fields. Paolo expresses the belief that digital technology, online educational platforms, and other educational technologies are crucial for the future of education, and Tether is investing in this area. |
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Post time 6-10-2023 09:36:17
