Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Now, our next guest is the biggest player in the
Speaker 2: stable coin space, Tether. He is Tether CEO Paolo Areno,
Speaker 2: and for this conversation, I do want to bring in
Speaker 2: as well Bloomberg Crypto and Digital Payments editor Mike Reagan,
Speaker 2: who sits here on set with us as well. Paulo,
Speaker 2: thank you so much for coming in and great to
Speaker 2: see you in New York. I know you're in Washington
Speaker 2: for the last couple of days here as the Senate
Speaker 2: addresses the Genius Act, which does call for federal oversight
Speaker 2: of large stable coin issuers by the Federal Reserve. So
Speaker 2: I want to get your thinking. Will Tether, with its
Speaker 2: dominant USDT coin be compliant with this.
Speaker 1: First of all, thank you very much for having me.
Speaker 1: We are very honored for the United States that he
Speaker 1: is the biggest country in the world to look at technology,
Speaker 1: to look to regulate the technology that we created in
Speaker 1: twenty fourteen, so is a very big step for us.
Speaker 1: And yes, we are very interested in seeing how the
Speaker 1: government of the United States is looking at regulating the
Speaker 1: stable coin technology. It's so important to us to see
Speaker 1: how the Genius Act is in fact distinguishing between foreign
Speaker 1: issues and the domestic issues. We believe in the importance
Speaker 1: of USDT as the most use digital dollars in all
Speaker 1: the emerging markets in development countries. Right for a long
Speaker 1: time we have been advocating how stable coins are surely
Speaker 1: important also in the United States. But it's true that
Speaker 1: in the United States you have tens of ways to
Speaker 1: pay each other with xell, PayPal, bank accounts, credit cards,
Speaker 1: that be cards, cash, you name it. But if you
Speaker 1: go in emerging markets, there are three billion people that
Speaker 1: are called under banks. They have been left behind by
Speaker 1: the traditional financial system. They need something that is stable
Speaker 1: in their lives, and that is the US dollar in
Speaker 1: a digital form that is USDT. So for US, the
Speaker 1: main interest will remain outside the United States, but also
Speaker 1: we are open to create a domestic issued a stable
Speaker 1: coin that will be competitive under the US economy.
Speaker 3: I'm curious what are sort of the impediments to compliance
Speaker 3: that are so onerous for you to make USDT compliant
Speaker 3: in the US and for Europe for that matter. You know,
Speaker 3: one of the biggest requirements is that the reserves be
Speaker 3: treasuries and sort of cash like money marketing, mutual funds.
Speaker 3: You're doing that already, so I'm curious what sort of
Speaker 3: the impediment would be to make us TT compliant in
Speaker 3: the US.
Speaker 1: And you're well, first of all, we are looking at
Speaker 1: the Genus Act in a way that will allow us
Speaker 1: to be compliant. So for US, it's very positive. So
Speaker 1: we can be compliant still having a strong focus on
Speaker 1: foreign markets because again those are the market markets that
Speaker 1: need us the most. When it comes to a local
Speaker 1: domestic stable coin, that you will have a different feature
Speaker 1: set than a foreign stable coin because again foreign stable
Speaker 1: coin are used for remittancies and for savings. Thirty seven
Speaker 1: percent of the user base of usd T is using
Speaker 1: ust for savings. In the US, you would use stable
Speaker 1: coins for payments to improve the efficiency of money. So
Speaker 1: when it comes to Mecca that you mentioned, the issue
Speaker 1: that we have with Mecca is the fact that Mecca
Speaker 1: is actually a lower bar than the GS in New
Speaker 1: SOCT we we are getting comfortable with the geniusc MECA
Speaker 1: instead would force US dollar stable coins to hold sixty
Speaker 1: percent of their reserves in uninsured cash deposits in European banks.
Speaker 1: That is a bad idea. The GENIUSS is pushing for
Speaker 1: one hundred percent in CASHAK equivalent with a strong push
Speaker 1: towards US treasure. Is that is a great idea rather
Speaker 1: than uninsured cash deposits. We have seen how our major
Speaker 1: competitor in two years ago had a huge issue with
Speaker 1: Silicon Valley Bank having uninsured cash deposits here in US.
Speaker 1: So we learned from that lesson, and I think Europe
Speaker 1: is falling behind the regulatory work that the US is
Speaker 1: actually pushing in a better way.
Speaker 2: You mentioned how you may issue a new stable coin
Speaker 2: for domestic use here in the US, so I'm curious
Speaker 2: where you are in that. Is this still in the
Speaker 2: conceptual stage, or if we're to liken this to a
Speaker 2: football game, is it in the first half, in the
Speaker 2: second half, in the extra time?
Speaker 1: I would say it's closer to the second half. Of course,
Speaker 1: we want to see the Genius Act passing, because again
Speaker 1: we have a foreign stable coin that, by the way,
Speaker 1: is I think the most compliant stable coin when it
Speaker 1: comes to all KSCAML. We work with more than twe
Speaker 1: and fifty five law enforcement agencies across fifty different countries.
Speaker 1: So when it comes when we were talking about BSA,
Speaker 1: when we're talking about complying we work with directly with
Speaker 1: the FBI. We onboard the United State Secret Services, We
Speaker 1: have a relationship with the departmental Justice, so all that
Speaker 1: is covered and that's you know, being foreign or domestic
Speaker 1: does not matter. We are going to comply and we
Speaker 1: are going to set the bar every day higher. But
Speaker 1: in general, we think that is important for the domestic
Speaker 1: one to one have a lot or diacty before moving forward,
Speaker 1: you know, pollo.
Speaker 3: Obviously, stable coins were an invention of the crypto market.
Speaker 3: They were used for years. Tether used for years just
Speaker 3: as sort of that dollar stand in in the crypto markets.
Speaker 3: But now a lot of the excitement is for sort
Speaker 3: of non crypto uses, you know, payments, companies, FinTechs. Even
Speaker 3: in the Wall Street Journal today a story about a
Speaker 3: consortium of the big banks considering creating their own stable coin.
Speaker 3: It feels like the competition's coming from all around you,
Speaker 3: and a lot of it seems to be centered on
Speaker 3: that idea of using it as just a method of payment, quicker, faster,
Speaker 3: cheaper money transacting outside of the crypto market and then
Speaker 3: just regular traditional business. How does tether fit into sort
Speaker 3: of that use of stable coins?
Speaker 1: Actually, in twenty twenty. If you see the growth of
Speaker 1: the trend of growth of market coup of us team
Speaker 1: in twenty twenty with the event with the pandemic, that
Speaker 1: trigger all the people in the emerging markets developing countries
Speaker 1: to start holding USDT as their savings account and their
Speaker 1: checking account. If you are living in Turkey or in Argentina,
Speaker 1: the turkishly lost fifty percent eighty percent of its value
Speaker 1: against the US dollar in the last five years. The
Speaker 1: Argentina payese lost ninety plus percent of its value against
Speaker 1: the US dollars. So for US in the last five years,
Speaker 1: us TA has always been as instrumental savings and the
Speaker 1: payment for one hundreds of minutes users. Today we have
Speaker 1: more than four hundred and twenty million users across emerging
Speaker 1: markets developing countries. We are growing at the pace of
Speaker 1: thirty million new wallets per quarter. That is almost like
Speaker 1: we were a social network, and that is what is
Speaker 1: making USDT very unique. We are not worried about the
Speaker 1: competitors coming from the big banks and consorti of big banks,
Speaker 1: just because they will look at the Western world, they
Speaker 1: will look at how they can serve in a likely
Speaker 1: better way. They're existing customer base our customer base is
Speaker 1: the thirty billion people that are unbanked. Those are not
Speaker 1: touched by the banking system because they are not generating
Speaker 1: enough rev news on a daily basis. So we feel
Speaker 1: that our market share will remain or will keep growing
Speaker 1: the next year.
Speaker 2: So that's our competitive advantage in many ways. I want
Speaker 2: to talk a little bit about the run ins that
Speaker 2: you've had in the past to other's. USUT has been seized,
Speaker 2: it's been forfeited in criminal cases including fraud and terrorist financing.
Speaker 2: You've also, as I understand, it has never been audited.
Speaker 2: So what is the progress with securing a Big four
Speaker 2: auditor for a proof of reserves.
Speaker 1: So the third of March twenty twenty five, so just
Speaker 1: a couple of months ago, we announced our new CFO
Speaker 1: that is a leader when it comes to contentioned audits.
Speaker 1: We don't think our should be considered concententious. It's very
Speaker 1: in our opinion, an audit of a stable coin like
Speaker 1: us ITT should be fairly easy. We have issues token
Speaker 1: he should tokens of the size of one on fifty
Speaker 1: two billion now, and we have very strong reserves. By
Speaker 1: the way, we keep our reserves here in the United
Speaker 1: States with counterfait Gerald. They hold our US treasuries right,
Speaker 1: so we have more than one hundred and twenty bill
Speaker 1: in the US treasure is alone. We are not a nation,
Speaker 1: but if we were a nation, we would be the
Speaker 1: eighteen largest nation in the world. And so right now
Speaker 1: we are in discussions with different of the Big four auditors.
Speaker 1: We are in good progress. There is still a little
Speaker 1: bit of adjustment phase on their side because from the
Speaker 1: previous administration that was very aggressive against crypto. The change
Speaker 1: from the current administration has been very, very dramatic, so
Speaker 1: they are going through the phase of adjustment. But the
Speaker 1: full audit is are our priority and I'm very.
Speaker 2: Positive way full audit as in full financial audit in
Speaker 2: addition to vetting the reserves.
Speaker 1: Well the reserves of the full audit of the reserves
Speaker 1: and also the auditors are will be looking at all
Speaker 1: our processes and all that, right, I think it's fair
Speaker 1: and is what people ask you.
Speaker 3: Know, you often make news for sort of non stable
Speaker 3: coin type of investments, even companies that are not involved
Speaker 3: in crypto. I'm curious, how do you think of sort
Speaker 3: of the long term strategy is for Sattered. It almost
Speaker 3: seems like potentially to create a sort of holding company
Speaker 3: like a Berkshire Hathway type of holding company beyond stable coins.
Speaker 3: Is that a fair model, the type of sort of
Speaker 3: what the ambitions are in the long term.
Speaker 1: So in the last three years the company generated around
Speaker 1: twenty billion dollars in profits, which less than five percent
Speaker 1: were distributed to the shareholders. The ass has been keppt
Speaker 1: in two parts, so we have two buckets. One is
Speaker 1: around billion. Seven billion dollars are kept in what we
Speaker 1: call access equity, so is additional equity on top of
Speaker 1: the one hundred percent reserves that we keep to secure
Speaker 1: the stable coin. And the ass around thirteen billion dollars
Speaker 1: are used to do a different investments. Recently we invested
Speaker 1: in at the go Ago that is a lend the
Speaker 1: biggest land owner in South America. And someone could ask
Speaker 1: you the question why you did that. But if you
Speaker 1: look at first of all, part of our portfolio, investment
Speaker 1: portfolio has to be capped for stable long term investments,
Speaker 1: maybe lower yield, but to steal very very solid. But
Speaker 1: the way we look at for example, that company and
Speaker 1: similar companies is the opportunity of starting to use stable
Speaker 1: coins and use it is specific for international commodity trading right,
Speaker 1: So we have been in talks with a lot of
Speaker 1: the commodity traders recently in the last year. They are
Speaker 1: all upset with their banking partners because their banking rails
Speaker 1: are becoming lower and lower, and so efficiency is very
Speaker 1: very important when it comes to commodity trading. So stable
Speaker 1: coins usdity is the choice for them for making their
Speaker 1: portfolio much more efficient. So we are making investments also
Speaker 1: to test the dases and grow our user base and
Speaker 1: market cup over time.
Speaker 2: Tyler CEO, really appreciate you joining us. Paolo Ardoino, thank
Speaker 2: you very much for coming in today. And Bloomberg Michael Reagan.
Speaker 2: Great conversation.