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Obstacles and pressures on the crypto ecosystem: the story of Tether

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In a rare public appearance, Paolo Ardoino, CTO of Bitfinex and Tether, commented on Tether’s influence on the crypto ecosystem and recent pressure from regulatory bodies.

Bitfinex is one of the largest cryptocurrency exchanges in the world, founded in 2012 and with a daily volume of approx 1 billion dollars, according to the aggregator Coinmarketcap. Tether, a rib of Bitfinex born in 2015, was the first stablecoin in the blockchain industry. A stablecoin, literal translation of stable currency, is a cryptocurrency linked to the value of a common currency such as the euro, dollar or yuan. Its purpose is to facilitate entry into the cryptocurrency market, because stablecoins are in effect cryptocurrencies, but are backed 100% by monetary or financial reserves of various types. A USD Tether, or USDT, is backed by reserves that allow you to redeem 1 USDT for one dollar. Today, Tether’s main product, the stablecoin USDT, is the largest coin of its kind in the entire ecosystem, with beyond 70 billion tokens In circulation.

The appearance of Ardoino during the Blockchain Week Roma it is a sign that Tether wants to open up to the public and be closer to users. Over the past twelve months, Tether has come under the scrutiny of media and institutions, under pressure from various government agencies. According to these, in fact, Tether did not hold sufficient reserves to support all the Tether tokens in circulation at all times, and this would have represented a risk for investors (companies and institutions) who have entered the market through this tool.

“It is important to clarify that Tether was born as an aid tool in the crypto world”, comments Ardoino, a Genoese expatriate in Switzerland. “This is mainly due to the work of Giancarlo Devasini, CFO of Bitfinex and Tether, and other people who had this idea, and started in 2014 at a time when there was no crypto regulation, and there were no stablecoins: Tether invented stablecoins. As often happens when there is a revolutionary idea, there are still no stakes. So Tether hired dozens of legal firms around the world to ask ‘it’s okay if we do this or that’ because there were no regulations. But the fact that there are no regulations does not mean that Tether has done something wrong. When the car was born at the beginning of the 1900s there were no roads, there was no regulation because there was no highway code. To date, all the work that Tether has done, with the immense noise it has generated, has finally forced the hand for the regulatory bodies to propose legislation. So we see that now the European Union is looking at stablecoins, as well as the United States; it has become such a large, so important tool that all national bodies, willy-nilly, must give it weight. We are happy and proud of this. It took a lot of effort: they attack you from all sides, very often from sectors that are bothered by the so fast growth of tools like Tether. But not only Tether. “

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There are, in fact, many stablecoins in circulation today. According to Coinmarketcap, the stablecoin market today capitalizes just over 140 billion dollars, and Tether holds more than the 50% of market share.

The stablecoins are increasingly becoming a valid alternative to the financial system for those who want to receive and send money all over the world without paying commissions to banks and intermediaries. “In Asia”, Ardoino explains during his speech, “it is now normal to find shops, even offline, that accept USDT”. “Better than Mastercard”, continues Ardoino on stage, who also cites Latin America and Turkey as places of growth in the adoption of stablecoin Tether.

“We annoy, as is normal: for new technologies, for new ideas. This has certainly led us to come under pressure over the years. But we have always believed in our idea. We we don’t want to go to the stock exchange. We could have done it for a long time. We didn’t do it because we believe in our idea, we believe in the contribution we are giving to society. There will always be criticisms, and some in my opinion some are even right: ‘you should have done more like this or that way’. “

Tether’s main competitor is USDC, a New York-based stablecoin that is not currently under scrutiny by regulators. Precisely in New York, Tether has suffered strong attacks and pressures. On February 23, 2021, Tether agreed with the New York State Attorney General a payment of approx 18.5 million dollars “Without admission of wrongdoing”, thus closing a difficult chapter in the history of the company.

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“We made two very important agreements”, continues Ardoino. “We are not actually ugly and bad. We have created an industry, we have practically spent our lives doing it: in Tether no one sleeps, I have not slept more than half an hour a night continuously for six years, and so do the others. We want to be part of an evolution positive of the financial world. The agreement means that we have not admitted or denied anything. We agreed on this figure with the regulator to move forward. Because the regulator has asked certain questions anyway (for example, ‘you should have been clearer on the website’). After a month of the agreement, we had prepared the declaration of transparency. After that, there was the declaration of the composition of the reserves, which no one did. We were the first to do it, to push for it. We also show you the rating of the commercial papers, which are A1 and A2 according to Standard & Poors. It’s a level of transparency, from a private company, that is unprecedented. And we do it because we realize that people want to know more and more things and we come up against them. “

Tether reserves are made up of over 65% da “commercial papers, or from financial instruments similar to shares that can be redeemed for cash. Commercial papers are sold by companies looking for liquidity, offering the latter at a discount on the actual redemption price. In this way, those who buy commercial papers make a profit at the time of redemption. Tether buys the commercial papers and then redeems them to increase its reserves. Tether has today approx 40 employees, and between Bitfinex and Tether there are 250. Some skills are shared, but most are separate (for example the investment part). Paolo Ardoino is CTO of Bitfinex and Tether. The CEO and CFO are also the same, but there are dedicated resources: developers, customer service and compliance are dedicated for Tether, “and in fact the Chief Compliance Officer is different, because they are two completely different services.” Bitfinex has many users, but the situation is different for Tether.

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“Many wonder how Tether manages all that money with so few employees. But Tether has set the token redemption limit to at least 100 thousand dollars, because we want to do few things, but done well. We don’t want to be like the others who handle $ 100 clients. We, when there was the crypto winter, (the period in which the whole market collapsed after the peak, ed) in 2018, we have not fired anyone. There have been American companies that have left 10%, 20% of their workforce at home. I don’t want to do this with Tether and Bitfinex employees. This is why we don’t go on the stock exchange: we don’t need to prove anything to anyone. The company is extremely profitable, the money remains in hand because we want to increase Tether’s reserves beyond 100%, we try to do our utmost. “


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