1 00:00:02,759 --> 00:00:07,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,039 --> 00:00:10,520 Speaker 2: Now, our next guest is the biggest player in the 3 00:00:10,560 --> 00:00:14,360 Speaker 2: stable coin space, Tether. He is Tether CEO Paolo Areno, 4 00:00:14,720 --> 00:00:16,720 Speaker 2: and for this conversation, I do want to bring in 5 00:00:16,720 --> 00:00:20,400 Speaker 2: as well Bloomberg Crypto and Digital Payments editor Mike Reagan, 6 00:00:20,440 --> 00:00:23,080 Speaker 2: who sits here on set with us as well. Paulo, 7 00:00:23,200 --> 00:00:24,680 Speaker 2: thank you so much for coming in and great to 8 00:00:24,680 --> 00:00:26,600 Speaker 2: see you in New York. I know you're in Washington 9 00:00:27,080 --> 00:00:29,680 Speaker 2: for the last couple of days here as the Senate 10 00:00:29,760 --> 00:00:33,560 Speaker 2: addresses the Genius Act, which does call for federal oversight 11 00:00:33,720 --> 00:00:36,920 Speaker 2: of large stable coin issuers by the Federal Reserve. So 12 00:00:36,960 --> 00:00:39,840 Speaker 2: I want to get your thinking. Will Tether, with its 13 00:00:39,920 --> 00:00:42,760 Speaker 2: dominant USDT coin be compliant with this. 14 00:00:43,560 --> 00:00:45,559 Speaker 1: First of all, thank you very much for having me. 15 00:00:46,720 --> 00:00:49,960 Speaker 1: We are very honored for the United States that he 16 00:00:50,040 --> 00:00:53,240 Speaker 1: is the biggest country in the world to look at technology, 17 00:00:53,240 --> 00:00:55,480 Speaker 1: to look to regulate the technology that we created in 18 00:00:55,520 --> 00:00:59,160 Speaker 1: twenty fourteen, so is a very big step for us. 19 00:00:59,360 --> 00:01:04,000 Speaker 1: And yes, we are very interested in seeing how the 20 00:01:04,000 --> 00:01:08,000 Speaker 1: government of the United States is looking at regulating the 21 00:01:08,280 --> 00:01:12,080 Speaker 1: stable coin technology. It's so important to us to see 22 00:01:12,080 --> 00:01:16,160 Speaker 1: how the Genius Act is in fact distinguishing between foreign 23 00:01:16,840 --> 00:01:20,040 Speaker 1: issues and the domestic issues. We believe in the importance 24 00:01:20,080 --> 00:01:25,000 Speaker 1: of USDT as the most use digital dollars in all 25 00:01:25,040 --> 00:01:28,280 Speaker 1: the emerging markets in development countries. Right for a long 26 00:01:28,319 --> 00:01:32,080 Speaker 1: time we have been advocating how stable coins are surely 27 00:01:32,120 --> 00:01:35,040 Speaker 1: important also in the United States. But it's true that 28 00:01:35,440 --> 00:01:37,399 Speaker 1: in the United States you have tens of ways to 29 00:01:37,440 --> 00:01:40,880 Speaker 1: pay each other with xell, PayPal, bank accounts, credit cards, 30 00:01:40,920 --> 00:01:43,280 Speaker 1: that be cards, cash, you name it. But if you 31 00:01:43,280 --> 00:01:45,440 Speaker 1: go in emerging markets, there are three billion people that 32 00:01:45,520 --> 00:01:48,520 Speaker 1: are called under banks. They have been left behind by 33 00:01:48,520 --> 00:01:52,080 Speaker 1: the traditional financial system. They need something that is stable 34 00:01:52,120 --> 00:01:54,080 Speaker 1: in their lives, and that is the US dollar in 35 00:01:54,120 --> 00:01:56,960 Speaker 1: a digital form that is USDT. So for US, the 36 00:01:57,160 --> 00:02:00,640 Speaker 1: main interest will remain outside the United States, but also 37 00:02:00,720 --> 00:02:04,360 Speaker 1: we are open to create a domestic issued a stable 38 00:02:04,400 --> 00:02:09,519 Speaker 1: coin that will be competitive under the US economy. 39 00:02:10,320 --> 00:02:13,720 Speaker 3: I'm curious what are sort of the impediments to compliance 40 00:02:13,760 --> 00:02:18,079 Speaker 3: that are so onerous for you to make USDT compliant 41 00:02:18,200 --> 00:02:20,400 Speaker 3: in the US and for Europe for that matter. You know, 42 00:02:20,880 --> 00:02:23,840 Speaker 3: one of the biggest requirements is that the reserves be 43 00:02:24,160 --> 00:02:27,240 Speaker 3: treasuries and sort of cash like money marketing, mutual funds. 44 00:02:27,480 --> 00:02:30,079 Speaker 3: You're doing that already, so I'm curious what sort of 45 00:02:30,120 --> 00:02:33,120 Speaker 3: the impediment would be to make us TT compliant in 46 00:02:33,160 --> 00:02:33,519 Speaker 3: the US. 47 00:02:33,600 --> 00:02:36,960 Speaker 1: And you're well, first of all, we are looking at 48 00:02:37,000 --> 00:02:40,040 Speaker 1: the Genus Act in a way that will allow us 49 00:02:40,120 --> 00:02:43,440 Speaker 1: to be compliant. So for US, it's very positive. So 50 00:02:43,520 --> 00:02:47,120 Speaker 1: we can be compliant still having a strong focus on 51 00:02:47,280 --> 00:02:49,959 Speaker 1: foreign markets because again those are the market markets that 52 00:02:50,080 --> 00:02:53,520 Speaker 1: need us the most. When it comes to a local 53 00:02:54,120 --> 00:02:57,000 Speaker 1: domestic stable coin, that you will have a different feature 54 00:02:57,080 --> 00:02:59,800 Speaker 1: set than a foreign stable coin because again foreign stable 55 00:02:59,800 --> 00:03:05,520 Speaker 1: coin are used for remittancies and for savings. Thirty seven 56 00:03:05,560 --> 00:03:07,639 Speaker 1: percent of the user base of usd T is using 57 00:03:07,720 --> 00:03:11,040 Speaker 1: ust for savings. In the US, you would use stable 58 00:03:11,080 --> 00:03:14,120 Speaker 1: coins for payments to improve the efficiency of money. So 59 00:03:15,120 --> 00:03:18,160 Speaker 1: when it comes to Mecca that you mentioned, the issue 60 00:03:18,200 --> 00:03:21,000 Speaker 1: that we have with Mecca is the fact that Mecca 61 00:03:21,280 --> 00:03:23,440 Speaker 1: is actually a lower bar than the GS in New 62 00:03:23,560 --> 00:03:27,040 Speaker 1: SOCT we we are getting comfortable with the geniusc MECA 63 00:03:27,080 --> 00:03:31,000 Speaker 1: instead would force US dollar stable coins to hold sixty 64 00:03:31,080 --> 00:03:35,280 Speaker 1: percent of their reserves in uninsured cash deposits in European banks. 65 00:03:35,520 --> 00:03:38,320 Speaker 1: That is a bad idea. The GENIUSS is pushing for 66 00:03:38,560 --> 00:03:42,680 Speaker 1: one hundred percent in CASHAK equivalent with a strong push 67 00:03:42,760 --> 00:03:45,200 Speaker 1: towards US treasure. Is that is a great idea rather 68 00:03:45,280 --> 00:03:48,360 Speaker 1: than uninsured cash deposits. We have seen how our major 69 00:03:48,400 --> 00:03:51,280 Speaker 1: competitor in two years ago had a huge issue with 70 00:03:51,360 --> 00:03:54,880 Speaker 1: Silicon Valley Bank having uninsured cash deposits here in US. 71 00:03:54,960 --> 00:03:57,680 Speaker 1: So we learned from that lesson, and I think Europe 72 00:03:57,920 --> 00:04:01,520 Speaker 1: is falling behind the regulatory work that the US is 73 00:04:01,560 --> 00:04:03,040 Speaker 1: actually pushing in a better way. 74 00:04:03,600 --> 00:04:05,960 Speaker 2: You mentioned how you may issue a new stable coin 75 00:04:06,040 --> 00:04:08,000 Speaker 2: for domestic use here in the US, so I'm curious 76 00:04:08,040 --> 00:04:09,720 Speaker 2: where you are in that. Is this still in the 77 00:04:09,800 --> 00:04:12,680 Speaker 2: conceptual stage, or if we're to liken this to a 78 00:04:12,760 --> 00:04:14,760 Speaker 2: football game, is it in the first half, in the 79 00:04:14,840 --> 00:04:16,320 Speaker 2: second half, in the extra time? 80 00:04:16,880 --> 00:04:19,039 Speaker 1: I would say it's closer to the second half. Of course, 81 00:04:19,120 --> 00:04:21,480 Speaker 1: we want to see the Genius Act passing, because again 82 00:04:21,560 --> 00:04:24,440 Speaker 1: we have a foreign stable coin that, by the way, 83 00:04:24,760 --> 00:04:27,280 Speaker 1: is I think the most compliant stable coin when it 84 00:04:27,320 --> 00:04:30,360 Speaker 1: comes to all KSCAML. We work with more than twe 85 00:04:30,440 --> 00:04:34,040 Speaker 1: and fifty five law enforcement agencies across fifty different countries. 86 00:04:34,279 --> 00:04:36,240 Speaker 1: So when it comes when we were talking about BSA, 87 00:04:36,320 --> 00:04:40,080 Speaker 1: when we're talking about complying we work with directly with 88 00:04:40,520 --> 00:04:43,320 Speaker 1: the FBI. We onboard the United State Secret Services, We 89 00:04:43,480 --> 00:04:46,240 Speaker 1: have a relationship with the departmental Justice, so all that 90 00:04:46,440 --> 00:04:48,720 Speaker 1: is covered and that's you know, being foreign or domestic 91 00:04:48,880 --> 00:04:51,280 Speaker 1: does not matter. We are going to comply and we 92 00:04:51,360 --> 00:04:54,000 Speaker 1: are going to set the bar every day higher. But 93 00:04:55,560 --> 00:04:57,920 Speaker 1: in general, we think that is important for the domestic 94 00:04:58,000 --> 00:05:01,279 Speaker 1: one to one have a lot or diacty before moving forward, 95 00:05:01,760 --> 00:05:02,279 Speaker 1: you know, pollo. 96 00:05:02,800 --> 00:05:05,719 Speaker 3: Obviously, stable coins were an invention of the crypto market. 97 00:05:05,920 --> 00:05:08,760 Speaker 3: They were used for years. Tether used for years just 98 00:05:08,839 --> 00:05:12,640 Speaker 3: as sort of that dollar stand in in the crypto markets. 99 00:05:12,680 --> 00:05:15,000 Speaker 3: But now a lot of the excitement is for sort 100 00:05:15,000 --> 00:05:19,320 Speaker 3: of non crypto uses, you know, payments, companies, FinTechs. Even 101 00:05:19,400 --> 00:05:21,440 Speaker 3: in the Wall Street Journal today a story about a 102 00:05:21,480 --> 00:05:25,200 Speaker 3: consortium of the big banks considering creating their own stable coin. 103 00:05:25,279 --> 00:05:28,520 Speaker 3: It feels like the competition's coming from all around you, 104 00:05:28,640 --> 00:05:30,240 Speaker 3: and a lot of it seems to be centered on 105 00:05:30,400 --> 00:05:35,839 Speaker 3: that idea of using it as just a method of payment, quicker, faster, 106 00:05:36,080 --> 00:05:39,800 Speaker 3: cheaper money transacting outside of the crypto market and then 107 00:05:39,920 --> 00:05:44,719 Speaker 3: just regular traditional business. How does tether fit into sort 108 00:05:44,720 --> 00:05:46,200 Speaker 3: of that use of stable coins? 109 00:05:46,800 --> 00:05:49,280 Speaker 1: Actually, in twenty twenty. If you see the growth of 110 00:05:49,360 --> 00:05:52,160 Speaker 1: the trend of growth of market coup of us team 111 00:05:52,360 --> 00:05:55,160 Speaker 1: in twenty twenty with the event with the pandemic, that 112 00:05:55,360 --> 00:05:58,560 Speaker 1: trigger all the people in the emerging markets developing countries 113 00:05:58,880 --> 00:06:02,520 Speaker 1: to start holding USDT as their savings account and their 114 00:06:02,640 --> 00:06:05,800 Speaker 1: checking account. If you are living in Turkey or in Argentina, 115 00:06:05,960 --> 00:06:09,039 Speaker 1: the turkishly lost fifty percent eighty percent of its value 116 00:06:09,040 --> 00:06:11,120 Speaker 1: against the US dollar in the last five years. The 117 00:06:11,480 --> 00:06:15,039 Speaker 1: Argentina payese lost ninety plus percent of its value against 118 00:06:15,040 --> 00:06:18,240 Speaker 1: the US dollars. So for US in the last five years, 119 00:06:18,360 --> 00:06:22,040 Speaker 1: us TA has always been as instrumental savings and the 120 00:06:22,160 --> 00:06:25,440 Speaker 1: payment for one hundreds of minutes users. Today we have 121 00:06:25,520 --> 00:06:28,120 Speaker 1: more than four hundred and twenty million users across emerging 122 00:06:28,200 --> 00:06:30,720 Speaker 1: markets developing countries. We are growing at the pace of 123 00:06:30,800 --> 00:06:33,480 Speaker 1: thirty million new wallets per quarter. That is almost like 124 00:06:33,560 --> 00:06:36,880 Speaker 1: we were a social network, and that is what is 125 00:06:36,960 --> 00:06:39,680 Speaker 1: making USDT very unique. We are not worried about the 126 00:06:39,760 --> 00:06:43,479 Speaker 1: competitors coming from the big banks and consorti of big banks, 127 00:06:43,800 --> 00:06:46,719 Speaker 1: just because they will look at the Western world, they 128 00:06:46,760 --> 00:06:50,280 Speaker 1: will look at how they can serve in a likely 129 00:06:50,360 --> 00:06:53,800 Speaker 1: better way. They're existing customer base our customer base is 130 00:06:53,839 --> 00:06:56,720 Speaker 1: the thirty billion people that are unbanked. Those are not 131 00:06:57,000 --> 00:06:59,359 Speaker 1: touched by the banking system because they are not generating 132 00:06:59,480 --> 00:07:02,040 Speaker 1: enough rev news on a daily basis. So we feel 133 00:07:02,160 --> 00:07:05,120 Speaker 1: that our market share will remain or will keep growing 134 00:07:05,200 --> 00:07:05,640 Speaker 1: the next year. 135 00:07:05,720 --> 00:07:08,279 Speaker 2: So that's our competitive advantage in many ways. I want 136 00:07:08,279 --> 00:07:10,560 Speaker 2: to talk a little bit about the run ins that 137 00:07:10,640 --> 00:07:13,800 Speaker 2: you've had in the past to other's. USUT has been seized, 138 00:07:13,840 --> 00:07:17,000 Speaker 2: it's been forfeited in criminal cases including fraud and terrorist financing. 139 00:07:17,320 --> 00:07:20,320 Speaker 2: You've also, as I understand, it has never been audited. 140 00:07:20,440 --> 00:07:22,840 Speaker 2: So what is the progress with securing a Big four 141 00:07:23,120 --> 00:07:24,720 Speaker 2: auditor for a proof of reserves. 142 00:07:25,440 --> 00:07:29,320 Speaker 1: So the third of March twenty twenty five, so just 143 00:07:29,360 --> 00:07:32,520 Speaker 1: a couple of months ago, we announced our new CFO 144 00:07:33,520 --> 00:07:37,280 Speaker 1: that is a leader when it comes to contentioned audits. 145 00:07:37,480 --> 00:07:39,880 Speaker 1: We don't think our should be considered concententious. It's very 146 00:07:40,760 --> 00:07:42,840 Speaker 1: in our opinion, an audit of a stable coin like 147 00:07:42,960 --> 00:07:45,960 Speaker 1: us ITT should be fairly easy. We have issues token 148 00:07:46,200 --> 00:07:48,760 Speaker 1: he should tokens of the size of one on fifty 149 00:07:48,760 --> 00:07:51,640 Speaker 1: two billion now, and we have very strong reserves. By 150 00:07:51,640 --> 00:07:53,640 Speaker 1: the way, we keep our reserves here in the United 151 00:07:53,680 --> 00:07:57,640 Speaker 1: States with counterfait Gerald. They hold our US treasuries right, 152 00:07:57,760 --> 00:07:59,880 Speaker 1: so we have more than one hundred and twenty bill 153 00:08:00,120 --> 00:08:03,520 Speaker 1: in the US treasure is alone. We are not a nation, 154 00:08:03,600 --> 00:08:04,880 Speaker 1: but if we were a nation, we would be the 155 00:08:05,000 --> 00:08:08,840 Speaker 1: eighteen largest nation in the world. And so right now 156 00:08:08,920 --> 00:08:12,600 Speaker 1: we are in discussions with different of the Big four auditors. 157 00:08:13,040 --> 00:08:17,720 Speaker 1: We are in good progress. There is still a little 158 00:08:17,760 --> 00:08:21,000 Speaker 1: bit of adjustment phase on their side because from the 159 00:08:21,040 --> 00:08:24,760 Speaker 1: previous administration that was very aggressive against crypto. The change 160 00:08:24,840 --> 00:08:27,680 Speaker 1: from the current administration has been very, very dramatic, so 161 00:08:28,040 --> 00:08:30,400 Speaker 1: they are going through the phase of adjustment. But the 162 00:08:30,560 --> 00:08:32,760 Speaker 1: full audit is are our priority and I'm very. 163 00:08:32,679 --> 00:08:35,480 Speaker 2: Positive way full audit as in full financial audit in 164 00:08:35,559 --> 00:08:37,359 Speaker 2: addition to vetting the reserves. 165 00:08:37,360 --> 00:08:40,360 Speaker 1: Well the reserves of the full audit of the reserves 166 00:08:40,640 --> 00:08:43,080 Speaker 1: and also the auditors are will be looking at all 167 00:08:43,160 --> 00:08:45,440 Speaker 1: our processes and all that, right, I think it's fair 168 00:08:45,559 --> 00:08:47,760 Speaker 1: and is what people ask you. 169 00:08:47,840 --> 00:08:51,800 Speaker 3: Know, you often make news for sort of non stable 170 00:08:51,880 --> 00:08:55,560 Speaker 3: coin type of investments, even companies that are not involved 171 00:08:55,600 --> 00:08:58,640 Speaker 3: in crypto. I'm curious, how do you think of sort 172 00:08:58,640 --> 00:09:01,240 Speaker 3: of the long term strategy is for Sattered. It almost 173 00:09:01,280 --> 00:09:04,840 Speaker 3: seems like potentially to create a sort of holding company 174 00:09:04,920 --> 00:09:08,720 Speaker 3: like a Berkshire Hathway type of holding company beyond stable coins. 175 00:09:08,800 --> 00:09:11,000 Speaker 3: Is that a fair model, the type of sort of 176 00:09:11,040 --> 00:09:12,760 Speaker 3: what the ambitions are in the long term. 177 00:09:13,240 --> 00:09:16,760 Speaker 1: So in the last three years the company generated around 178 00:09:16,760 --> 00:09:19,680 Speaker 1: twenty billion dollars in profits, which less than five percent 179 00:09:19,760 --> 00:09:22,600 Speaker 1: were distributed to the shareholders. The ass has been keppt 180 00:09:22,679 --> 00:09:26,439 Speaker 1: in two parts, so we have two buckets. One is 181 00:09:26,679 --> 00:09:30,199 Speaker 1: around billion. Seven billion dollars are kept in what we 182 00:09:30,320 --> 00:09:33,000 Speaker 1: call access equity, so is additional equity on top of 183 00:09:33,040 --> 00:09:35,560 Speaker 1: the one hundred percent reserves that we keep to secure 184 00:09:35,600 --> 00:09:37,800 Speaker 1: the stable coin. And the ass around thirteen billion dollars 185 00:09:38,240 --> 00:09:42,320 Speaker 1: are used to do a different investments. Recently we invested 186 00:09:42,320 --> 00:09:45,040 Speaker 1: in at the go Ago that is a lend the 187 00:09:45,040 --> 00:09:48,480 Speaker 1: biggest land owner in South America. And someone could ask 188 00:09:48,520 --> 00:09:50,520 Speaker 1: you the question why you did that. But if you 189 00:09:50,559 --> 00:09:53,640 Speaker 1: look at first of all, part of our portfolio, investment 190 00:09:53,679 --> 00:09:57,000 Speaker 1: portfolio has to be capped for stable long term investments, 191 00:09:57,440 --> 00:10:01,360 Speaker 1: maybe lower yield, but to steal very very solid. But 192 00:10:01,679 --> 00:10:04,199 Speaker 1: the way we look at for example, that company and 193 00:10:04,360 --> 00:10:08,240 Speaker 1: similar companies is the opportunity of starting to use stable 194 00:10:08,280 --> 00:10:12,640 Speaker 1: coins and use it is specific for international commodity trading right, 195 00:10:12,720 --> 00:10:15,599 Speaker 1: So we have been in talks with a lot of 196 00:10:15,640 --> 00:10:18,400 Speaker 1: the commodity traders recently in the last year. They are 197 00:10:18,440 --> 00:10:22,360 Speaker 1: all upset with their banking partners because their banking rails 198 00:10:22,400 --> 00:10:25,600 Speaker 1: are becoming lower and lower, and so efficiency is very 199 00:10:25,679 --> 00:10:28,280 Speaker 1: very important when it comes to commodity trading. So stable 200 00:10:28,320 --> 00:10:32,679 Speaker 1: coins usdity is the choice for them for making their 201 00:10:32,720 --> 00:10:36,040 Speaker 1: portfolio much more efficient. So we are making investments also 202 00:10:36,080 --> 00:10:39,640 Speaker 1: to test the dases and grow our user base and 203 00:10:39,679 --> 00:10:40,559 Speaker 1: market cup over time. 204 00:10:41,280 --> 00:10:44,760 Speaker 2: Tyler CEO, really appreciate you joining us. Paolo Ardoino, thank 205 00:10:44,800 --> 00:10:47,760 Speaker 2: you very much for coming in today. And Bloomberg Michael Reagan. 206 00:10:47,880 --> 00:10:48,600 Speaker 2: Great conversation.