WEBVTT - Tether CEO Paolo Ardoino Talks Stablecoins, GENIUS Act

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Now, our next guest is the biggest player in the

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<v Speaker 2>stable coin space, Tether. He is Tether CEO Paolo Areno,

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<v Speaker 2>and for this conversation, I do want to bring in

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<v Speaker 2>as well Bloomberg Crypto and Digital Payments editor Mike Reagan,

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<v Speaker 2>who sits here on set with us as well. Paulo,

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<v Speaker 2>thank you so much for coming in and great to

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<v Speaker 2>see you in New York. I know you're in Washington

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<v Speaker 2>for the last couple of days here as the Senate

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<v Speaker 2>addresses the Genius Act, which does call for federal oversight

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<v Speaker 2>of large stable coin issuers by the Federal Reserve. So

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<v Speaker 2>I want to get your thinking. Will Tether, with its

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<v Speaker 2>dominant USDT coin be compliant with this.

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<v Speaker 1>First of all, thank you very much for having me.

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<v Speaker 1>We are very honored for the United States that he

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<v Speaker 1>is the biggest country in the world to look at technology,

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<v Speaker 1>to look to regulate the technology that we created in

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<v Speaker 1>twenty fourteen, so is a very big step for us.

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<v Speaker 1>And yes, we are very interested in seeing how the

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<v Speaker 1>government of the United States is looking at regulating the

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<v Speaker 1>stable coin technology. It's so important to us to see

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<v Speaker 1>how the Genius Act is in fact distinguishing between foreign

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<v Speaker 1>issues and the domestic issues. We believe in the importance

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<v Speaker 1>of USDT as the most use digital dollars in all

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<v Speaker 1>the emerging markets in development countries. Right for a long

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<v Speaker 1>time we have been advocating how stable coins are surely

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<v Speaker 1>important also in the United States. But it's true that

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<v Speaker 1>in the United States you have tens of ways to

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<v Speaker 1>pay each other with xell, PayPal, bank accounts, credit cards,

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<v Speaker 1>that be cards, cash, you name it. But if you

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<v Speaker 1>go in emerging markets, there are three billion people that

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<v Speaker 1>are called under banks. They have been left behind by

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<v Speaker 1>the traditional financial system. They need something that is stable

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<v Speaker 1>in their lives, and that is the US dollar in

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<v Speaker 1>a digital form that is USDT. So for US, the

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<v Speaker 1>main interest will remain outside the United States, but also

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<v Speaker 1>we are open to create a domestic issued a stable

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<v Speaker 1>coin that will be competitive under the US economy.

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<v Speaker 3>I'm curious what are sort of the impediments to compliance

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<v Speaker 3>that are so onerous for you to make USDT compliant

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<v Speaker 3>in the US and for Europe for that matter. You know,

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<v Speaker 3>one of the biggest requirements is that the reserves be

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<v Speaker 3>treasuries and sort of cash like money marketing, mutual funds.

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<v Speaker 3>You're doing that already, so I'm curious what sort of

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<v Speaker 3>the impediment would be to make us TT compliant in

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<v Speaker 3>the US.

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<v Speaker 1>And you're well, first of all, we are looking at

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<v Speaker 1>the Genus Act in a way that will allow us

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<v Speaker 1>to be compliant. So for US, it's very positive. So

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<v Speaker 1>we can be compliant still having a strong focus on

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<v Speaker 1>foreign markets because again those are the market markets that

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<v Speaker 1>need us the most. When it comes to a local

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<v Speaker 1>domestic stable coin, that you will have a different feature

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<v Speaker 1>set than a foreign stable coin because again foreign stable

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<v Speaker 1>coin are used for remittancies and for savings. Thirty seven

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<v Speaker 1>percent of the user base of usd T is using

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<v Speaker 1>ust for savings. In the US, you would use stable

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<v Speaker 1>coins for payments to improve the efficiency of money. So

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<v Speaker 1>when it comes to Mecca that you mentioned, the issue

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<v Speaker 1>that we have with Mecca is the fact that Mecca

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<v Speaker 1>is actually a lower bar than the GS in New

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<v Speaker 1>SOCT we we are getting comfortable with the geniusc MECA

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<v Speaker 1>instead would force US dollar stable coins to hold sixty

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<v Speaker 1>percent of their reserves in uninsured cash deposits in European banks.

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<v Speaker 1>That is a bad idea. The GENIUSS is pushing for

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<v Speaker 1>one hundred percent in CASHAK equivalent with a strong push

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<v Speaker 1>towards US treasure. Is that is a great idea rather

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<v Speaker 1>than uninsured cash deposits. We have seen how our major

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<v Speaker 1>competitor in two years ago had a huge issue with

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<v Speaker 1>Silicon Valley Bank having uninsured cash deposits here in US.

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<v Speaker 1>So we learned from that lesson, and I think Europe

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<v Speaker 1>is falling behind the regulatory work that the US is

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<v Speaker 1>actually pushing in a better way.

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<v Speaker 2>You mentioned how you may issue a new stable coin

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<v Speaker 2>for domestic use here in the US, so I'm curious

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<v Speaker 2>where you are in that. Is this still in the

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<v Speaker 2>conceptual stage, or if we're to liken this to a

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<v Speaker 2>football game, is it in the first half, in the

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<v Speaker 2>second half, in the extra time?

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<v Speaker 1>I would say it's closer to the second half. Of course,

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<v Speaker 1>we want to see the Genius Act passing, because again

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<v Speaker 1>we have a foreign stable coin that, by the way,

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<v Speaker 1>is I think the most compliant stable coin when it

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<v Speaker 1>comes to all KSCAML. We work with more than twe

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<v Speaker 1>and fifty five law enforcement agencies across fifty different countries.

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<v Speaker 1>So when it comes when we were talking about BSA,

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<v Speaker 1>when we're talking about complying we work with directly with

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<v Speaker 1>the FBI. We onboard the United State Secret Services, We

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<v Speaker 1>have a relationship with the departmental Justice, so all that

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<v Speaker 1>is covered and that's you know, being foreign or domestic

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<v Speaker 1>does not matter. We are going to comply and we

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<v Speaker 1>are going to set the bar every day higher. But

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<v Speaker 1>in general, we think that is important for the domestic

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<v Speaker 1>one to one have a lot or diacty before moving forward,

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<v Speaker 1>you know, pollo.

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<v Speaker 3>Obviously, stable coins were an invention of the crypto market.

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<v Speaker 3>They were used for years. Tether used for years just

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<v Speaker 3>as sort of that dollar stand in in the crypto markets.

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<v Speaker 3>But now a lot of the excitement is for sort

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<v Speaker 3>of non crypto uses, you know, payments, companies, FinTechs. Even

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<v Speaker 3>in the Wall Street Journal today a story about a

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<v Speaker 3>consortium of the big banks considering creating their own stable coin.

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<v Speaker 3>It feels like the competition's coming from all around you,

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<v Speaker 3>and a lot of it seems to be centered on

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<v Speaker 3>that idea of using it as just a method of payment, quicker, faster,

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<v Speaker 3>cheaper money transacting outside of the crypto market and then

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<v Speaker 3>just regular traditional business. How does tether fit into sort

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<v Speaker 3>of that use of stable coins?

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<v Speaker 1>Actually, in twenty twenty. If you see the growth of

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<v Speaker 1>the trend of growth of market coup of us team

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<v Speaker 1>in twenty twenty with the event with the pandemic, that

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<v Speaker 1>trigger all the people in the emerging markets developing countries

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<v Speaker 1>to start holding USDT as their savings account and their

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<v Speaker 1>checking account. If you are living in Turkey or in Argentina,

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<v Speaker 1>the turkishly lost fifty percent eighty percent of its value

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<v Speaker 1>against the US dollar in the last five years. The

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<v Speaker 1>Argentina payese lost ninety plus percent of its value against

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<v Speaker 1>the US dollars. So for US in the last five years,

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<v Speaker 1>us TA has always been as instrumental savings and the

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<v Speaker 1>payment for one hundreds of minutes users. Today we have

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<v Speaker 1>more than four hundred and twenty million users across emerging

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<v Speaker 1>markets developing countries. We are growing at the pace of

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<v Speaker 1>thirty million new wallets per quarter. That is almost like

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<v Speaker 1>we were a social network, and that is what is

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<v Speaker 1>making USDT very unique. We are not worried about the

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<v Speaker 1>competitors coming from the big banks and consorti of big banks,

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<v Speaker 1>just because they will look at the Western world, they

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<v Speaker 1>will look at how they can serve in a likely

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<v Speaker 1>better way. They're existing customer base our customer base is

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<v Speaker 1>the thirty billion people that are unbanked. Those are not

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<v Speaker 1>touched by the banking system because they are not generating

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<v Speaker 1>enough rev news on a daily basis. So we feel

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<v Speaker 1>that our market share will remain or will keep growing

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<v Speaker 1>the next year.

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<v Speaker 2>So that's our competitive advantage in many ways. I want

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<v Speaker 2>to talk a little bit about the run ins that

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<v Speaker 2>you've had in the past to other's. USUT has been seized,

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<v Speaker 2>it's been forfeited in criminal cases including fraud and terrorist financing.

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<v Speaker 2>You've also, as I understand, it has never been audited.

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<v Speaker 2>So what is the progress with securing a Big four

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<v Speaker 2>auditor for a proof of reserves.

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<v Speaker 1>So the third of March twenty twenty five, so just

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<v Speaker 1>a couple of months ago, we announced our new CFO

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<v Speaker 1>that is a leader when it comes to contentioned audits.

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<v Speaker 1>We don't think our should be considered concententious. It's very

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<v Speaker 1>in our opinion, an audit of a stable coin like

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<v Speaker 1>us ITT should be fairly easy. We have issues token

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<v Speaker 1>he should tokens of the size of one on fifty

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<v Speaker 1>two billion now, and we have very strong reserves. By

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<v Speaker 1>the way, we keep our reserves here in the United

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<v Speaker 1>States with counterfait Gerald. They hold our US treasuries right,

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<v Speaker 1>so we have more than one hundred and twenty bill

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<v Speaker 1>in the US treasure is alone. We are not a nation,

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<v Speaker 1>but if we were a nation, we would be the

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<v Speaker 1>eighteen largest nation in the world. And so right now

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<v Speaker 1>we are in discussions with different of the Big four auditors.

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<v Speaker 1>We are in good progress. There is still a little

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<v Speaker 1>bit of adjustment phase on their side because from the

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<v Speaker 1>previous administration that was very aggressive against crypto. The change

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<v Speaker 1>from the current administration has been very, very dramatic, so

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<v Speaker 1>they are going through the phase of adjustment. But the

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<v Speaker 1>full audit is are our priority and I'm very.

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<v Speaker 2>Positive way full audit as in full financial audit in

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<v Speaker 2>addition to vetting the reserves.

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<v Speaker 1>Well the reserves of the full audit of the reserves

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<v Speaker 1>and also the auditors are will be looking at all

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<v Speaker 1>our processes and all that, right, I think it's fair

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<v Speaker 1>and is what people ask you.

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<v Speaker 3>Know, you often make news for sort of non stable

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<v Speaker 3>coin type of investments, even companies that are not involved

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<v Speaker 3>in crypto. I'm curious, how do you think of sort

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<v Speaker 3>of the long term strategy is for Sattered. It almost

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<v Speaker 3>seems like potentially to create a sort of holding company

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<v Speaker 3>like a Berkshire Hathway type of holding company beyond stable coins.

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<v Speaker 3>Is that a fair model, the type of sort of

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<v Speaker 3>what the ambitions are in the long term.

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<v Speaker 1>So in the last three years the company generated around

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<v Speaker 1>twenty billion dollars in profits, which less than five percent

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<v Speaker 1>were distributed to the shareholders. The ass has been keppt

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<v Speaker 1>in two parts, so we have two buckets. One is

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<v Speaker 1>around billion. Seven billion dollars are kept in what we

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<v Speaker 1>call access equity, so is additional equity on top of

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<v Speaker 1>the one hundred percent reserves that we keep to secure

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<v Speaker 1>the stable coin. And the ass around thirteen billion dollars

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<v Speaker 1>are used to do a different investments. Recently we invested

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<v Speaker 1>in at the go Ago that is a lend the

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<v Speaker 1>biggest land owner in South America. And someone could ask

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<v Speaker 1>you the question why you did that. But if you

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<v Speaker 1>look at first of all, part of our portfolio, investment

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<v Speaker 1>portfolio has to be capped for stable long term investments,

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<v Speaker 1>maybe lower yield, but to steal very very solid. But

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<v Speaker 1>the way we look at for example, that company and

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<v Speaker 1>similar companies is the opportunity of starting to use stable

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<v Speaker 1>coins and use it is specific for international commodity trading right,

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<v Speaker 1>So we have been in talks with a lot of

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<v Speaker 1>the commodity traders recently in the last year. They are

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<v Speaker 1>all upset with their banking partners because their banking rails

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<v Speaker 1>are becoming lower and lower, and so efficiency is very

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<v Speaker 1>very important when it comes to commodity trading. So stable

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<v Speaker 1>coins usdity is the choice for them for making their

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<v Speaker 1>portfolio much more efficient. So we are making investments also

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<v Speaker 1>to test the dases and grow our user base and

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<v Speaker 1>market cup over time.

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<v Speaker 2>Tyler CEO, really appreciate you joining us. Paolo Ardoino, thank

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<v Speaker 2>you very much for coming in today. And Bloomberg Michael Reagan.

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<v Speaker 2>Great conversation.