Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: In late January, Todd Gillespie was at a hotel in
Speaker 2: Al Salvador listening to a man in a T shirt
Speaker 2: and track pants talk about the global financial system and
Speaker 2: the end of the world as we know it.
Speaker 3: New regulations plus you know, wars, plus economy instability, monetary debasement,
Speaker 3: AI and all that. These are all variables.
Speaker 1: If you look at all of them, you can predict
Speaker 1: the trajectory of society.
Speaker 4: Now, I was in this big ballroom and this hotel
Speaker 4: in San Salvador, darkened lights and chandeliers, and this man
Speaker 4: is standing on this stage in front of you know,
Speaker 4: a thousand odd people really and presenting this PowerPoint slides
Speaker 4: with you know, pictures of dark storm clouds.
Speaker 1: Society cannot be stable if really for the population of work,
Speaker 1: billions and billions of people don't have access to what
Speaker 1: maybe many of us in this room are used to.
Speaker 4: But you know, basically talking about the shackles of the
Speaker 4: current financial system and the political decline and geopolitical dangers
Speaker 4: that the world is seeing, and basically how his company
Speaker 4: is going to thrive through that.
Speaker 2: Todd is a reporter on the Finance team at Bloomberg.
Speaker 2: He normally covers large investment banks, including Goldman Sachs. But
Speaker 2: guy on stage that was Paolo Arduino, the CEO of Tether,
Speaker 2: a cryptocurrency linked to the value of the US dollar.
Speaker 2: Arduino told the crowd in that ballroom that he's building
Speaker 2: Tether not just to survive armageddon, but to thrive in.
Speaker 4: Armageddon when many other companies will fail, when countries might fail,
Speaker 4: when we might see migration crises. Seed, yeah, exactly. He
Speaker 4: sees Tether as this sort of life raft.
Speaker 2: In just over a decade, Tether has grown from an
Speaker 2: idea into a global crypto juggernaut. It has faced some
Speaker 2: major hurdles along the way, but under President Trump's crypto
Speaker 2: friendly administration and with investors looking for alternatives to traditional
Speaker 2: financial systems, Tether could now be seeing some of its
Speaker 2: fastest growth yet.
Speaker 4: That is one of the most increasingly powerful companies in
Speaker 4: the world that you've already never heard of.
Speaker 2: I'm Stacey Bennox Smith in for Sarah Holder and David Gurra,
Speaker 2: and this is the big take from Bloomberg News today
Speaker 2: on the show. Tether one of the world's most powerful
Speaker 2: and most secretive companies. We unpack how its business model
Speaker 2: of issuing dollar linked stable coin is turning it into
Speaker 2: a deal's machine, and whether scrutiny over its political connections
Speaker 2: could complicate its meteoric rise. I am a little bit
Speaker 2: embarrassed to say I had not heard of Tether, but
Speaker 2: it is a huge company. Will you describe Tether a
Speaker 2: little bit? What is it and what does it do?
Speaker 4: Yeah? Of course, daisy. And you're not alone in thinking
Speaker 4: you know and not really knowing what you feel better.
Speaker 2: Essentially, Teather offers a kind of cryptocurrency, a stable coin.
Speaker 4: Its main product is this thing called USDT, which is
Speaker 4: a token that essentially mirrors the value of the US dollar.
Speaker 2: It's pegged.
Speaker 4: It's pegged. Yeah, exactly, it's tethered, right, That's the whole
Speaker 4: point y.
Speaker 2: That is smart, Todd says. The Tether origin story goes
Speaker 2: something like.
Speaker 4: This, About like fifteen nine years ago, some very smart
Speaker 4: people had this idea of having this token that was
Speaker 4: pegged to the US dollar, but operate it outside of
Speaker 4: the traditional financial system. You know, this comes from the
Speaker 4: same portion of the sort of crypto world that is
Speaker 4: somewhat libertarian, it's somewhat anti the controlled that central banks
Speaker 4: have over the.
Speaker 2: Monetary system fiat currency.
Speaker 4: Anti fiat currency, anti you know, inflation, essentially the ability
Speaker 4: of the federal government and central banks to devalue a
Speaker 4: currency and essentially devalue what a lot of normal people
Speaker 4: and common people, you know, get affected by. And they're
Speaker 4: basically saying, you should have some kind of fixed money
Speaker 4: supply that is outside of the traditional financial system that
Speaker 4: allows the free flow of money and takes some power
Speaker 4: out of the hands of central banks.
Speaker 2: By tethering the value of us DT to the US dollar,
Speaker 2: the idea is that the value of their stable coin
Speaker 2: will remain stable. One USDT is supposed to always equal
Speaker 2: one dollar. Its value doesn't rise and fall like bitcoin
Speaker 2: and other cryptocurrencies. And because it's on the blockchain, you
Speaker 2: can send Tether to anyone else with a crypto wallet
Speaker 2: instantly online without having to involve a bank. Todd says
Speaker 2: both those qualities, the stability and the transferability, make it
Speaker 2: really appealing for people in emerging markets.
Speaker 4: When you buy a tether coin or you essentially go
Speaker 4: to Tether's website and you buy a TETHERID, you give
Speaker 4: it a USDT, you give it a dollar, you give
Speaker 4: the company a dollar plus a small fee, you get
Speaker 4: a tether in return, which enables you to send things
Speaker 4: and enables you to remit payments. For instance, one of
Speaker 4: the main use cases that tether has is for people,
Speaker 4: for instance, who might live in the US who want
Speaker 4: to send money home to their family and don't want
Speaker 4: a Western Union or a traditional bank to take a
Speaker 4: huge cut of that. Tether allows you to do that
Speaker 4: with minimal fees essentially, so it basically is a much
Speaker 4: more efficient way of doing that of processing payments, and
Speaker 4: fundamentally that's what it says makes it so popular.
Speaker 2: But those same reasons, the stable value, the ability to
Speaker 2: store it and send it without involving banks, have also
Speaker 2: made USDT a popular way for people to conduct illicit transactions,
Speaker 2: and that is something tether says it has tried to
Speaker 2: clamp down on.
Speaker 4: Tether says that partly because it's on a blockchain, it
Speaker 4: allows you to trace these transactions. So once you can
Speaker 4: identif to fin whose wallets are so on the other side,
Speaker 4: who these users are, who the sender is, who the
Speaker 4: receiver is, allows you to freeze that actually better than
Speaker 4: you at for instance, with cash, right like it's better
Speaker 4: to at least have something on a blockchain where you
Speaker 4: can isolate it, you can trace it, you can trace
Speaker 4: it versus like having, you know, some drug cartel go
Speaker 4: over borders with bags and bags of cash.
Speaker 2: In a statement, Tether said it quote takes fraud, consumer harm,
Speaker 2: and the misuse of USDT extremely seriously and maintains a
Speaker 2: zero tolerance policy toward illicit activity end quote. The company
Speaker 2: added it works with law enforcement agencies worldwide and has
Speaker 2: frozen about four billion dollars worth of USDT tokens at
Speaker 2: the behest of authorities. But a central question around Tether
Speaker 2: is its reserves. For every dollar's worth of USDT, the
Speaker 2: company needs to hold a dollar in some kind of stable,
Speaker 2: relatively liquid asset to back it up. If not, the
Speaker 2: whole currency could collapse. But it is really hard for
Speaker 2: anyone outside the company to know exactly how much money
Speaker 2: Tether holds or how that money's invested.
Speaker 4: Heather has never had a proper audit, which has led
Speaker 4: to a lot of skepticism over the strength of its reserves.
Speaker 2: Tether has announced it's aiming to undergo a full audit
Speaker 2: by the end of twenty twenty six, but for many
Speaker 2: years that uncertainty gave US Regulator's pause. In February of
Speaker 2: twenty twenty one, the New York Attorney General's Office found
Speaker 2: the Tether misrepresented its reserve holdings and banned the company
Speaker 2: from doing business in New York. Later that year, the
Speaker 2: Commodity Futures Trading Commission found the between twenty sixteen and
Speaker 2: twenty eighteen, Tether only had enough FIAT reserves to back
Speaker 2: up its us DT tokens about a quarter of the
Speaker 2: time and find the company forty one million dollars. But
Speaker 2: when the second Trump administration began, the political wins shifted
Speaker 2: for Tether.
Speaker 4: In the Trump administration, you have a Colma secretary, Howard Lutnik,
Speaker 4: who was formerly the CEO of Counterfitzgerald, which is Tether's
Speaker 4: longtime banker. You have him in the cabinet.
Speaker 2: His family owned some of the company from one.
Speaker 4: Indeed, yeah, so essentially through the company, Howard Lutnik's children
Speaker 4: own a conversible bond that represents about a possible five
Speaker 4: percent stake in Tether, which at a valuation of five
Speaker 4: hundred billion dollars potential valuation of that large, that's obviously
Speaker 4: a lot of money.
Speaker 2: That's a private island money.
Speaker 4: It's private Island money.
Speaker 2: Last October, Commerce Secretary Lutnik sold his multi billion dollar
Speaker 2: ownership interest in Canter Fitzgerald, the financial services company he
Speaker 2: led for more than three decades, to trust benefiting his
Speaker 2: four children. At about the same time, one of those
Speaker 2: trusts took the unusual step of borrowing an undisclosed sum
Speaker 2: from Tether. A spokesman for Counter Fitzgerald and the Lutnik
Speaker 2: children declined to discuss the size of the loan or
Speaker 2: whether it was used to finance any part of the
Speaker 2: asset sale. And in recip advance to questions about LATINX
Speaker 2: divestiture and Tether's loan, a White House spokesperson said, quote,
Speaker 2: the only special interest guiding the Trump Administration's decision making
Speaker 2: is the best interest of the American people. During the
Speaker 2: same period of time, US lawmakers also fast tracked legislation
Speaker 2: to encourage the adoption of stable coins.
Speaker 4: We've seen the Genius Act being passed through Congress, which
Speaker 4: essentially creates a regulatory framework for stable coins. So not
Speaker 4: just Tether, but also Circle, which is its biggest rival
Speaker 4: but is a smaller company, are basically now given guardrails
Speaker 4: to issue tokens that are compliant with US government regulations
Speaker 4: which put them under greater obligations in terms of compliance
Speaker 4: and also mandate them to back their currencies, back their
Speaker 4: tokens with reserves of US treasuries, which the government wants
Speaker 4: because essentially, the more biased you have for US treasuries,
Speaker 4: it allows you to lower the cost of your debt. Right,
Speaker 4: increase in demand helps you lower the price for the government. Right,
Speaker 4: so increases the.
Speaker 2: Cost is like how the government gets a lot of
Speaker 2: its money. These are little loans exactly.
Speaker 4: So on a purely commercial level, for Scott Besant or
Speaker 4: the US Treasury, you know it's a great deal.
Speaker 2: In late twenty twenty five, Teather CEO posted on x
Speaker 2: that his company held about one hundred and thirty five
Speaker 2: billion dollars worth of US treasuries, which he said made
Speaker 2: it the seventeenth largest holder of US debt in the
Speaker 2: world and the only entity in the top twenty that
Speaker 2: was not a country. Treasury Secretary Scott Bessont has lauded
Speaker 2: the stable coin industry. Purchasing all of that debt, a
Speaker 2: movie says, will lower US borrowing costs and cement the
Speaker 2: dollar status as the world's reserve currency.
Speaker 4: They didn't really care all that much about you know,
Speaker 4: what Teather might be doing with its profits that it
Speaker 4: gets from interests on its results.
Speaker 2: It's counting on that demand, I mean, one hundred billion
Speaker 2: dollars worth of treasuries. If that demand goes away, that's
Speaker 2: a big deal for our entire economy potentially.
Speaker 4: Yeah, that's a concern that has been raised meetings, you know,
Speaker 4: among finance chiefs of major economies. We've reported that. You know,
Speaker 4: last year at the IMF, there were discussions about the
Speaker 4: potential for stable coins to become a much larger part
Speaker 4: of buying government debt around the world. And that's that
Speaker 4: is a potentially, if not worrying thing, it's a thing
Speaker 4: that people have to think carefully about, right because if
Speaker 4: there's a run on a stable coin, if these companies
Speaker 4: aren't set up properly, if there are compliance failures, or
Speaker 4: you know, if you simply can't trust the folks who
Speaker 4: are running them, that leaves your whole economy open to
Speaker 4: potentially a lot of a lot of danger on a
Speaker 4: financial level.
Speaker 2: So what's the company doing with all that money, and
Speaker 2: how is it positioning itself to move into the US market.
Speaker 2: That's next. Tether has tradition only invested most of its
Speaker 2: one hundred and ninety three billion dollars worth of assets
Speaker 2: in US treasuries. That model has led to a lot
Speaker 2: of profit. Last year, with only three hundred people on staff,
Speaker 2: Tether reported a profit of ten billion dollars, and now
Speaker 2: Bloomberg's Todd Gillespie says Tether is looking to grow even bigger.
Speaker 4: It is now trying to raise money at a five
Speaker 4: hundred billion plus dollar valuation, which would cement it really
Speaker 4: for the first time as one of the most valuable
Speaker 4: private companies in the world. When it started its fundraising
Speaker 4: process that we broke the story of late last year
Speaker 4: that was about on par with what SpaceX was raising
Speaker 4: money at. So it gives you an idea of the
Speaker 4: kind of ballparks that we're talking about SpaceX, Open AI Tether.
Speaker 2: With so much capital, Tether is poised to become a
Speaker 2: big player wherever it chooses to invest its reserves. And
Speaker 2: it's not just us dead.
Speaker 4: They have been buying land in South America. They've been
Speaker 4: supporting commodity trading companies. They've been buying up gold huge,
Speaker 4: huge quantities.
Speaker 2: By the way, last year, Tether bought seventy tons of
Speaker 2: gold that is more than the reported purchases of almost
Speaker 2: any central bank. It's interesting that a crypto company is
Speaker 2: investing so heavily in gold and US treasuries. I mean,
Speaker 2: those are sort of the two traditional safe havens from volatility,
Speaker 2: and crypto is not a place to go to avoid
Speaker 2: volatility generally.
Speaker 4: And it's interesting to think about how they're hedging that.
Speaker 4: I mean, it seems like a huge hedge because they
Speaker 4: are they are they are investing heavily and very very
Speaker 4: safe assets, but they also see bitcoin as increasingly a
Speaker 4: safe asset. Their argument is that, you know, as you
Speaker 4: see other stores of value become less and less predictable,
Speaker 4: the demand for bitcoin will go up, you know, as
Speaker 4: a safe haven asset as well. So from their mind,
Speaker 4: that's what they're doing. They are future proofing the company,
Speaker 4: but also showing a way to have a future proofed economy.
Speaker 2: Buying gold and US treasuries is one thing. Governments, companies,
Speaker 2: and individuals all over the world can do that. But
Speaker 2: Tether is also looking to expand its operations to America.
Speaker 2: Before the passage of the Genius Act in July of
Speaker 2: twenty twenty five, stable coins were in a sort of
Speaker 2: legal limbo in the US, which limited their popularity and
Speaker 2: growth in this country. But back in August, Tether announced
Speaker 2: a new hire to help change that.
Speaker 4: One of the key people involved in this is a
Speaker 4: guy called bo Hines, who, by the way, is just
Speaker 4: thirty years old, but he was one of the key
Speaker 4: crypto advisors in the Trump administration and left recently and
Speaker 4: is now CEO of Tether's US operations.
Speaker 2: And in January, just a few months after Hinz joined Tether,
Speaker 2: the company launched a new stable coin, the us AT.
Speaker 4: So the main Tether token is USDT, but US eighty
Speaker 4: is essentially a token that is complying with the Genius Act,
Speaker 4: complying with US government regularly. This is it's a.
Speaker 2: Special coin Teather's issuing just for the US market.
Speaker 4: Right They're essentially interchangeable, but this one complies specifically with
Speaker 4: the restrictions of the US government's new regulations.
Speaker 2: Like USDT, the USAT token is pegged to the US dollar.
Speaker 2: What makes us AT different is that US regulations restrict
Speaker 2: where Tether can keep the reserves. USAT is exclusively backed
Speaker 2: by assets like US treasuries. Tether also cannot place USAT
Speaker 2: reserves into precious metals like gold or into Bitcoin, and
Speaker 2: the company's pitch for US consumers is different too. Since
Speaker 2: people in the US already have access to dollars, having
Speaker 2: a dollar linked stable coin doesn't really have the same appeal.
Speaker 2: It's not the same safe haven from inflation as it
Speaker 2: is in other parts of the world. In the US,
Speaker 2: todd says the company is looking to push Tether as
Speaker 2: a better way to process payments.
Speaker 4: What they're enabling people to do here, for instance, what
Speaker 4: they think will be an appealing characteristic for company and
Speaker 4: individuals here is that you can avoid things like credit
Speaker 4: card fees. If you're a restaurant, I could pay for.
Speaker 2: My dinner at a restaurant with yeah US.
Speaker 4: At Yeah, you can avoid a three percent credit card fee,
Speaker 4: for instance, they might give you a discount in the
Speaker 4: same way that if you pay in cash, Oh, they
Speaker 4: might do yeah. And also the transaction would be settled
Speaker 4: immediately because it's done on the blockchain, which is essentially instantaneous.
Speaker 2: To bolster that effort, Tether has invested in a wide
Speaker 2: network of online companies that cater to US consumers. Tad
Speaker 2: says the strategy, in part is to use those platforms
Speaker 2: to help push Americans into using USAT.
Speaker 4: So Tether has invested in Rumble, for instance, which is
Speaker 4: a sort of right wing free speech video platform arrival
Speaker 4: to YouTube, where they already have a big base of
Speaker 4: you know, millions of users who use that all the time.
Speaker 4: A lot of the events at the conference in San
Speaker 4: salvad Or were streamed on to Rumble. So they're looking
Speaker 4: to grow, and Paolo in our interview told me that
Speaker 4: they are looking increasingly four digital platforms in the US
Speaker 4: to invest into and that allows them to increase their
Speaker 4: use case, increase their relevance essentially to the US economy.
Speaker 2: Tether has also used its fortunes to make inroads into Washington.
Speaker 2: An entity that identified itself as Tether America signed on
Speaker 2: as a donor to Trump's White House Ballroom project. The
Speaker 2: New York Times has reported that Tether is also expected
Speaker 2: to back a new political spending group ahead of the
Speaker 2: midrum elections this year, which it could do through its
Speaker 2: new US arm. So, after having done a deep dive
Speaker 2: into this company and followed this company and it's sort
Speaker 2: of recent inroads into the US economy and political system,
Speaker 2: what is your takeaway here? Is there a sort of
Speaker 2: a systemic danger that Tether poses or how do you
Speaker 2: feel after having reported out all of this.
Speaker 4: I think I'll answer your question with two points. I
Speaker 4: think the first one is that we've seen stable coin
Speaker 4: adoption actually plateau a bit recently in the past year
Speaker 4: or two.
Speaker 2: Yeah, crypto has not had a good right couple of months.
Speaker 4: Crypto as a whole Yeah, the crypto as an industry
Speaker 4: certainly has hasn't had a whole great couple of months,
Speaker 4: and that will obviously like hit faith in the sector
Speaker 4: and hit faith in stable coins as a proxy as
Speaker 4: well to some degree. There's no doubt about that. My
Speaker 4: takeaway is, I, you know, I don't think that Heather's
Speaker 4: going to become the most mainstream currency in the US
Speaker 4: or payment token in the US anytime super soon, But
Speaker 4: there is a growing use case that I think they
Speaker 4: will work out somehow a way to expand in the
Speaker 4: US and increase adoption some ways, whether that's through digital
Speaker 4: platforms or elsewhere. But the other thing that really interests
Speaker 4: me is really what they're going to do with their profits.
Speaker 4: And they've invested, as we've said when Rumble, but they've
Speaker 4: also invested in dozens of other companies. I mean, their
Speaker 4: investment portfolio across the world is about one hundred and
Speaker 4: thirty different companies that they've invested their profits in, and
Speaker 4: what are they really going to do with all that
Speaker 4: money is a huge question.
Speaker 2: This is the Big Take from Bloomberg News. I'm Stacey
Speaker 2: Mannix Smith in for Sarah Holder and David Gurra. To
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Speaker 2: and thank you for listening. We'll be back tomorrow.