Tether CEO on Stablecoin Legislation, Proof of Reserves

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00:00So I want to get your thinking. Will Tether with its dominant USDT coin be compliant with this?

00:06First of all, thank you very much for having me. We are very honored for the United States,

00:13that is the biggest country in the world, to look at the technology, to look to regulate the

00:17technology that we created in 2014. So it's a very big step for us. And yes, we are very

00:24interested in seeing how the government of the United States is looking at regulating the

00:31stablecoin technology. It's important to us to see how the Genius Act is in fact distinguishing

00:38between foreign issuers and domestic issuers. We believe in the importance of USDT as the

00:45most used digital dollar in all the emerging markets in developing countries. For a long

00:51time, we have been advocating how stablecoins are surely important also in the United States.

00:57But it's true that in the United States, you have tens of ways to pay each other with Zelle,

01:02PayPal, bank accounts, credit cards, debit cards, cash, you name it. But if you go into

01:06emerging markets, there are three billion people that are called underbanked. They have been

01:11left behind by the traditional financial system. They need something that is stable in their

01:15lives, and that is the US dollar in a digital form that is USDT. So for us, the main interest

01:21will remain outside the United States. But also we are open to create a domestic issued

01:26stablecoin that will be competitive under the US economy.

01:32Yeah, Apollo, I'm curious what are sort of the impediments to compliance that are so onerous

01:38for you to make USDT compliant in the US and for Europe for that matter. You know, one of the

01:44biggest requirements is that the reserves be treasuries and sort of cash like money market

01:50mutual funds. You're doing that already. So I'm curious what sort of the impediment would be

01:54to make USDT compliant in the US and Europe?

01:57Well, first of all, we are looking at the Ginius Act in a way that will allow us to be compliant.

02:04So for us, it's very positive. So we can be compliant still having a strong focus on foreign

02:10markets because, again, those are the markets that need us the most. When it comes to a local

02:16domestic stablecoin, that you will have a different feature set than a foreign stablecoin. Because,

02:22again, foreign stablecoins are used for remittances and for savings. 37% of the user base of USDT

02:30is using USDT for savings. In the US, you wouldn't use stablecoins for payments to improve the efficiency

02:36of money. So when it comes to Mika that you mentioned, the issue that we have with Mika is the fact that Mika

02:44is actually a lower bar than the Ginius Act. We are getting comfortable with the Ginius Act.

02:50Mika instead would force US dollar stablecoins to hold 60% of their reserves in uninsured cash

02:56deposits in European banks. That is a bad idea. The Ginius Act is pushing for 100% in cash equivalent

03:04with a strong push towards US treasuries. That is a great idea. Rather than uninsured cash deposits,

03:10we have seen how our major competitor in two years ago had a huge issue with Silicon Valley Bank

03:15having uninsured cash deposits here in the US. So we learned from that lesson. And I think Europe

03:20is falling behind the regulatory framework that the US is actually pushing in a better way.

03:26You mentioned how you may issue a new stablecoin for domestic use here in the US. So I'm curious

03:31where you are in that. Is this still in the conceptual stage? Or if we were to liken this to

03:36a football game? Is it in the first half, in the second half, in the extra time?

03:40I would say it's closer to the second half. Of course, we want to see the Ginius Act passing

03:43because, again, we have a foreign stablecoin that, by the way, is, I think, the most compliant

03:49stablecoin when it comes to all KYC, AML. We work with more than 255 law enforcement agencies

03:55across 50 different countries. So when we're talking about BSA, when we're talking about

04:00compliance, we work directly with the FBI. We onboard the United States Secret Services.

04:06We have a relationship with the Department of Justice. So all that is covered. And that's,

04:10you know, being foreign or domestic does not matter. We are going to comply. And we're going

04:15to set the bar every day higher. But in general, we think that is important for the domestic one

04:21to have a clear, a regulatory clarity before moving forward.

04:25You know, Paolo, obviously stablecoins were an invention of the crypto market. They were used

04:30for years, Tether used for years, just as sort of that dollar stand-in in the crypto markets.

04:36But now a lot of the excitement is for sort of non-crypto uses, you know, payments, companies,

04:41fintechs, even in the Wall Street Journal today, a story about a consortium of the big banks

04:46considering creating their own stablecoin. It feels like the competition is coming from all around

04:51you. And a lot of it seems to be centered on that idea of using it as just a method of payment,

04:57quicker, faster, cheaper money transacting outside of the crypto market and in just regular

05:03traditional business. How does Tether fit into sort of that use of stablecoins?

05:10Actually, in 2020, if you see the growth or the trend of growth of market capital USDT,

05:15in 2020, with the pandemic, that triggered all the people in the emerging markets, developing

05:21countries to start holding USDT as their savings account and their checking account, if you are

05:27living in Turkey or in Argentina, the Turkish leader lost 50 percent or 80 percent of its value

05:32against the US dollar in the last five years. The Argentina peso lost 90 plus percent of its value

05:38against the US dollar. So for us in the last five years, USDT has always been an instrument of savings

05:44and the payment for hundreds of millions of users. Today, we have more than 420 million users across

05:51emerging markets, developing countries. We are growing at the pace of 30 million new wallets

05:55per quarter. That is almost like we were a social network. And that is what is making USDT very unique.

06:01We are not worried about the competitors coming from the big banks and consortium of big banks,

06:06just because they will look at the Western world. They will look at how they can serve in a slightly better

06:13way of their existing customer base. Our customer base is the 30 billion people that are unbanked.

06:19Those are not touched by the banking system because they are not generating enough revenues on a yearly basis.

06:24So we feel that our market share will remain or will keep growing in the next years.

06:29That's your competitive advantage in many ways. I want to talk a little bit about the run-ins that you've had

06:34in the past. Tether's USDT has been seized. It's been forfeited in criminal cases, including fraud

06:39and terrorist financing. You've also, as I understand it, has never been audited.

06:43So what is the progress with securing a big four auditor for a proof of reserves?

06:48So the 3rd of March, 2025, so just a couple of months ago, we announced our new CFO that is a leader

06:58when it comes to contention audits. We don't think ours should be considered contention.

07:02It's very, in our opinion, an audit of a stable coin like USDT should be fairly easy.

07:07We have issued tokens of a size of 152 billion now, and we have very strong reserves.

07:14By the way, we keep our reserves here in the United States with Cantor Fitzgerald.

07:19They hold our U.S. treasuries, right? So we have more than 120 billion in U.S. treasuries alone.

07:24We are not a nation, but if we were a nation, we would be the 18th largest nation in the world.

07:30And so right now we are in discussions with different of the big four auditors.

07:36We are in good progress. There is still a little bit of adjustment phase on their side,

07:43because from the previous administration that was very aggressive against crypto,

07:47the change from the current administration has been very, very dramatic.

07:50So they are going through the phase of adjustment, but the full audits are our priority, and I'm very positive.

07:56Wait, full audit, as in full financial audit, in addition to vetting the reserves?

08:00Well, the reserves of the full audit of the reserves.

08:03And also the auditors will be looking into all our processes and all that, right?

08:07I think it's fair and is what people ask.

08:10You know, you often make news for sort of non-stable coin type of investments,

08:16even companies that are not involved in crypto.

08:19I'm curious how you think of sort of the long-term strategies for Tether.

08:24It almost seems like potentially to create a sort of holding company,

08:28like a Berkshire Hathaway type of holding company beyond stable coins.

08:32Is that a fair model to think of sort of what the ambitions are in the long term?

08:36So in the last three years, the company generated around $20 billion in profits,

08:41which less than 5% were distributed to the shareholders.

08:44The rest has been kept in two parts, so we have two buckets.

08:49One is around $7 billion are kept in what we call excess equity,

08:54so it's additional equity on top of the 100% reserves that we keep to secure the stable coin.

08:59And the rest, around $13 billion, are used to do different investments.

09:03Recently, we invested in Adigo Agro, that is the biggest landowner in South America.

09:10And someone could ask you the question why you did that.

09:13But if you look at, first of all, part of our investment portfolio has to be kept for stable long-term investments,

09:20maybe lower yield, but still very, very solid.

09:23But the way we look at, for example, that company and similar companies is the opportunity of starting to use stable coins

09:31and use it in specific for international commodity trading, right?

09:36So we have been in talks with a lot of the commodity traders recently in the last year.

09:41They are all upset with their banking partners because their banking rails are becoming as low as lower.

09:47And so efficiency is very, very important when it comes to commodity trading.

09:50So stable coins, USDT, is the choice for them for making their portfolio much more efficient.

09:57So we are making investments also to test the tasies and grow our user base and market cap over time.

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