原文标题：Flush With Cash, Tether Has Got Microsoft, Google, and Amazon in Its Crosshairs
Original article by: JOEL KHALILI, WIRED
Original translation: TechFlow
Led by new CEO Paolo Ardoino, the crypto firm is investing heavily in an attempt to enter an artificial intelligence market dominated by the world’s largest tech companies.
Paolo Ardoino, CEO of Tether Holdings, at the Paris Blockchain Week Summit in April 2024. PHOTO CREDIT: NATHAN LAINE/BLOOMBERG; GETTY IMAGES
Paolo Ardoino, the new CEO, is facing a difficult but enviable problem: how to best manage billions of dollars. Recently, Tether has been flush with funds and is pushing into unfamiliar new areas, such as artificial intelligence. Ardoino's ambitious plan is to take on Microsoft, Google, and Amazon.
Tether, registered in the British Virgin Islands, is one of the world’s largest crypto businesses. Most of its revenue comes from its stablecoin, USDT, which is pegged to the U.S. dollar through a basket of cash and other assets.
The model is relatively simple: Tether collects dollars in exchange for tokens that customers can freely trade in crypto markets. It keeps some of the dollars in cash, uses most of it to buy interest-bearing securities, and lends some of it out. If a customer wants to redeem USDT tokens for the corresponding dollars, Tether will withdraw from the reserve, but in the meantime, it earns income from the assets it holds.
Tether’s reserves are primarily made up of short-term U.S. Treasuries, and its revenue is tied to current interest rates, meaning that as central banks raise rates due to inflation, the company’s profitability is increasing. Tether recently reported profits of $5.2 billion in the first half of 2024, with total reserves of $118.5 billion.
Led by Ardoino, who took over as CEO in December after six years as CTO, Tether is looking for ways to spend those idle funds. Some of the money is going to build a buffer in USDT reserves, but the rest is going into the company’s new venture capital arm, Tether Evo, Ardoino said. The company has already taken a controlling stake in neural implant technology startup Blackrock Neurotech and invested in data center operator Northern Data Group, whose infrastructure is used to train artificial intelligence models.
Tether has also been the subject of controversy. In 2021, the company reached a $41 million settlement with U.S. regulators who alleged that its statements about the composition of its reserves were misleading. In 2023, Tether was accused of using fraudulent means to obtain banking services in its early history. In addition, the United Nations and blockchain analysis firms have claimed that USDT has become a tool for money laundering, terrorist financing, and other illegal activities, although Tether has disputed this characterization.
Ardoino said the company is often misunderstood. He said Tether’s most pressing focus is to extend the crypto ideals of decentralization — the idea that power should be in the hands of the many, not the few — to the artificial intelligence industry and other emerging technologies. “Having a company that is independent of the traditional players is going to be very important,” he said.
Ardoino spoke with WIRED by phone earlier this month. The following interview has been edited for simplicity and clarity.
WIRED: This year, Tether has been pushing to diversify its business model and move into venture capital. Tell me the reasoning behind this.
Ardoino: Tether has become extremely profitable over the past two years, thanks to rising interest rates. When Tether launched, the yield on reserves was 0.2%, and today it’s 5.5%. Of course, this situation may be time-limited—we hear that interest rates may be cut—but even with inflation at 3% or 4%, it’s hard to get back to 0.2%.
Over the past 24 months, Tether has accumulated approximately $11.9 billion in profits. We could have distributed all of this money to shareholders and made everyone happy. Instead, a portion of it was added to the reserve to further support the stablecoin, and the rest was essentially kept in the investment arm.
What is your venture thesis? It looks like you guys are going beyond crypto.
Ardoino: We come from Bitcoin—we are Bitcoiners at heart. Maybe we are not perfect as human beings, but we strive to carry the Bitcoin ideals of financial freedom, free speech, and free access to technology in every investment.
The concept of decentralization can be applied to different areas, such as artificial intelligence. We have seen that artificial intelligence has been heavily politicized. We believe that it will be very important to have a role that is independent of traditional players such as Amazon, Microsoft, and Google.
The same is true for another important technology: brain-computer interfaces (BCIs). This is going to be very important in the future. Building brain-computer interfaces that respect individual privacy — ensuring that data stays local and isn’t collected by the same companies that run social media platforms — is going to be very important.
We are not a traditional venture capital firm. We don’t throw money at companies just to find the unicorn that will give us a 100x return. Of course, that’s great, but it has to be aligned with our vision. Interdependence, resilience, and disintermediation—these terms are very important to us.
How much capital will Tether invest in venture capital?
Ardoino: We will always prioritize the stablecoin business because risk management is very important. Now, we have a good buffer in reserves, but if USDT continues to expand, we will expand proportionally.
But almost everything else — I would say over 90% of the profits that Tether makes — we’re going to seek to reinvest in things that are important to us and our community. We don’t need to give out huge amounts of money as dividends.
Some VCs have done a terrible job of character assessments of crypto founders, some of whom (like Sam Bankman-Fried) were later ruled to be frauds. How do you plan to ensure Tether doesn’t make the same mistake?
Ardoino: Going through every detail and performing the most thorough due diligence is the only way to protect your investment capital. Not every investment is perfect, but we use our hearts and minds to ensure the best outcome.
We work directly with management; if improvements are needed, we help. Otherwise, we are prepared to replace management. Technology itself is not flawed; if a company is not doing well, it is usually because of management. We are very serious when investing because we care.
What do you think about the recent allegations against Northern Data, one of our portfolio companies, which has been accused of securities fraud?
This will be assessed by the courts. We have been working with Northern Data for quite some time. The company has great potential; it can provide an independent perspective to the three largest companies in the data center business. I am not in a position to comment on the allegations of several disgruntled former employees. Northern Data has responded strongly to these allegations and we stand behind our investment.
Let's talk about the current regulatory environment. It can be said that Tether operates similarly to a bank: it accepts deposits, keeps them as cash and securities or makes loans. Why shouldn't Tether be regulated the same way as a bank?
Banks have loans that make up 90% of their balance sheets, which means they only have 10% collateral. Tether is currently collateralized at 105%. I don’t think it’s fair to compare Tether to banks. It’s like saying, “The engine of a car is the same as the engine of an airplane, so we regulate cars and airplanes the same way.”
Tether reportedly did not seek a license to operate in the EU under the Markets in Crypto-Assets (MiCA) regime. Does Tether have plans to exit the European market?
We are formalizing our strategy for the European market. MiCA imposes daily issuance and trading volume limits on non-euro stablecoins, such as USDT. [The aim is to prevent dollar-denominated stablecoins from replacing the euro as the main medium of exchange within the EU.] I agree with this because it doesn't hurt anyone.
But another limitation is the requirement for reserves. For stablecoins like USDT, under MiCA, up to 60% of the reserves must be in the form of cash deposits. If you have a stablecoin with €10 billion in reserves, you need to deposit €6 billion in a bank. The bank can lend out up to 90% of the amount, keeping only €600 million. Imagine if a customer asks to redeem €2 billion (worth of stablecoins), but the bank only has €600 million. Then you have a situation where both the bank and the stablecoin go bankrupt. I don't think this is safe. In fact, this is a way for stablecoins to create additional systemic risk in Europe, rather than reducing it.
The continued lack of a comprehensive audit of Tether’s reserves has fueled speculation that USDT is not, or at least was not, backed one-to-one by its reserves in the past. Why can’t Tether fulfill its promise to provide a comprehensive audit?
Audits remain a high priority for us. Speaking of stablecoins, US Senator Warren told the Big Four accounting firms that they should be cautious about taking on new crypto clients, especially after the FTX incident. [In March 2023, Senator Warren called for the creation of an accounting regulator to "stop fake audits of crypto companies."] FTX didn't help at all. They were heroes in the mainstream media, but they screwed up everything.
Did the Big Four accounting firms explicitly reject Tether? Did Tether apply and get rejected?
We have had discussions with some of these firms.
What reasons did they provide?
Basically saying now is not the right time. If you are a big four accounting firm, thousands of your clients are banks. If you have a stablecoin as a client, they might not be happy. This is speculation on my part, but Tether created a digital dollar that lets people have checking and savings accounts, so stablecoins might be seen as a threat to the banking industry.
It's not just Tether, Circle (the company that issues USDC) doesn't have an audit either - it has a certification. This has long been misunderstood and misreported by the mainstream media. If other stablecoins are so sacred, why don't they have audits? Even the stablecoin that is considered the most regulated in the world [USDC] doesn't have an audit. This is an industry problem.
[Circle is a client of Big Four accounting firm Deloitte, which checks the accuracy of its claims about the size and composition of USDC reserves monthly but has not issued a full audit report since 2021.]
To be clear: has Tether ever issued USDT tokens that were not backed by USD reserves?
Tether is always backed. In 2022, a short attack on Tether attempted to cause a bank run, and we processed over $20 billion in redemptions in 20 days. I think Tether deserves some recognition.
At least until 2024, it should be acknowledged that the initial assessment of Tether’s credibility may not be entirely correct. We don’t need medals, but we would like to see less criticism as we work to create the future of finance.
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