In an interview with Be[In]Crypto, Paolo Ardoino, chief technology officer of Bitfinex and Tether spoke on the current challenges the industry brings as stablecoins continue to remain a hot topic.
The current disaster of TerraUSD and Luna has highlighted the importance of stablecoin reserve mechanisms – but is Tether ready for these upcoming obstacles?
“We see cryptocurrencies increasing as a means of payment and a store of value,” Ardoino explained. “Stablecoins have become a viable medium of exchange for e-commerce, which have proven to be a resource for businesses looking for a cheaper and more efficient way to make payments between buyers and sellers.”
The narrative regarding Bitcoin and some cryptocurrencies as a perfect store of value asset seems to have channelled perfectly right into the mainstream media, finding its way into notable conversations, including billionaire Paul Tudor Jones, who in a chain of events may have influenced companies such as Tesla or MicroStrategy to invest part of their cashflow into bitcoin.
Crypto’s expansion pushes Tether to evolve
Indeed, Tether has great leverage against any other competitors, which Adoino believes is still growing.
“More and more people are starting to accept USDt as a form of payment for services, goods, and more. We have it because it offers a faster, transparent, and more efficient solution than fiat currencies,” Ardoino said.
Tether’s empire was dependent upon a solid legacy, though the expansion of crypto has also introduced new actors in the arena.
New stablecoins have arisen in different forms, such as the corporative format with USD Coin (USDC) and BNB, as well as decentralized approaches including DAI and algorithmic procedures such as Celo Dollar (cUSD) and the late TerraUSD (UST).
Ardoino examines this new competition not as a threat, but as an asset for the whole crypto industry. Either way, Tether has to expand its activities into new businesses and not depend solely on its legacy.
Plan B: Tether as legal tender
In March, the city of Lugano, Switzerland, surprised the crypto industry as it announced that it would be accepting Bitcoin and USDT as legal tender. Backed by Tether Operations Limited, the city intends to create a regional crypto hub within Europe, similar to El Salvador.
“Our goal is to make Lugano the crypto capital of Europe and function as a good precedent for other cities worldwide,” Ardoino says.
It has since set up a multi-million dollar fund that would help finance blockchain-based startups, promising to contribute 500 scholarships related to the industry, which will subsequently invest into renewable energy Bitcoin mining and establish a solid headquarter city for the crypto industry.
How much actual adoption have you gathered since BTC and USDt became legal tender in Lugano, Switzerland?
Paolo Ardoino (PO): A month after presenting Plan B, more than a dozen companies with several hundred million dollars in assets have appointed legal advisers and trustees to begin moving their operations to Lugano. We’ve seen a lot of interest from Zug and Dubai, Italy, and many other places worldwide.
It’s pretty striking that you have chosen Lugano and not Zurich or Zug in Switzerland, a city well known for its crypto-friendly policy. Why?
Ardoino: Lugano is the economic capital of southern Switzerland, strategically located between the metropolitan areas of Milan and Zurich. Situated in a natural and scenic context and home to a major financial center and vibrant fashion, commodity, and pharmaceutical centers and remains a sought-after tourist destination. This city plans to stay at the forefront of technological development, proposing to venture into blockchain with one of the leading companies in the sector.
After the so-called launch of Plan B in Lugano, Ardoino spoke to the question of why these expansion plans aren’t finding their ways into other countries and continents?
As for adoption, Latin America is a great example of the endless possibilities for crypto.
Why not El Salvador or the island of Roatan in Honduras where BTC is already legal tender?
Ardoino: It is all part of a process; Rome was not made in a day as the proverb says. I applaud President Bukele’s courage to work with new financial instruments whose objective is the welfare of his country and its people.
Switzerland acts an umbrella as for regulation for the crypto industry, even attracting major traditional banks to offer crypto services such as the Spanish titan BBVA as an experimental territory. This service is not offered in Spain or other countries due to regulation issues, a perfect example of the potential of Switzerland of becoming the European hub.
After the so-called launch of Plan B in Lugano, one question arose, why not expand this activity to other countries or continents? As for adoption, Latin America is a great example of the endless possibilities for crypto.
Latin America: the gold rush for the crypto industry
Tether has recently pushed its brand and influence into new markets, such as Mexico has witnessed with the launch of their new stablecoin MXMT, pegged to the Mexican peso.
Could this be the new direction for Tether?
Ardoino mentioned the importance of stablecoins for the region and the aim of USDT in this context:
Ardoino: We are looking forward to working with cities in Latin America, stablecoins like Tether tokens USDt are not the future money; they are the money of now.
Stablecoins are a vital tool for migrant workers, many of them from Spanish-speaking countries, who send remittances across international borders. These workers have to send remittances through banks (and not everyone has access to a bank account). This is a slow, expensive, and inefficient process with high fees, so we propose opening a Bitfinex account (free, has no maintenance cost, and is easy to use) and removing the broker from this equation.
Some loobies may stop the speed of technological progress, but this will only be for a time. Our mission to democratize people’s access to the world of finance will be a fact sooner rather than later.
Crypto has many different meanings and usages depending on which place in the world you are. For Western countries, it may be seen mainly, for now, as a store of value, whereas for many places of the world it has a real utility and can change many aspects of their lives.
Latin America has many attractive locations to set up projects such as Plan B. Of course, at this moment El Salvador has the legal framework where crypto can be used within a national environment as Bitcoin is the legal tender of the country side by side with the US dollar.
The groundbreaking initiative of Bukele to adopt Bitcoin and also launch innovative new financial products such as the so-called Volcano Bonds has surprised the entire world. Bitfinex, sibling company related to Tether, is actively involved in such projects.
Regarding the volcano bonds, Bitfinex will finally be in charge of the sale of the Salvadoran government bonds. Is there an economic benefit or favourable treatment for Bitfinex for this service?
Ardoino The most significant benefit we seek to obtain is to help El Salvador improve the quality of life of its inhabitants to encourage its economic growth.
On April 10, Bitfinex and Tether set up a relief fund to help the families of the people affected by the gangs in El Salvador. Both companies once again stand with the disadvantaged and have donated 25 bitcoin, equivalent to more than 1.4 million dollars. Since then, the fund has increased its value by 50% because other companies have followed our lead.
In addition, since El Salvador adopted Bitcoin, tourism has increased by 30%, and numerous business people worldwide are bringing investments to the country.
Our goal is to work with sectors that allow greater access to financial services by making them cheaper, more transparent, secure, and efficient.
The CTO of Tether dodged partly the matter of the questions regarding the benefits of participating with such capital and human power in major projects, as in Plan B in Lugano or on the Volcano Bonds in El Salvador. Either way, Tether as Bitfinex would benefit greatly by converting themselves into the operational company behind the Volcano Bonds as being the forerunner of a crypto hub, if the projects were to be successful.
The great elephant in the room: Tether´s FUD
In this new phase of the crypto industry regulation and transparency are becoming imperative. Since the downfall of the ecosystem of Terra, which induced USDT to lose its dollar parity temporally, each stablecoin is now under heavy scrutiny.
Tether has been accused broadly by the crypto community as also by lawsuits for not having their fiat reserves 1:1 dollar-backed to their USDT minting.
This dark shadow has been lurking almost since it’s inception and still haunts Tether as also the crypto community. The effects of a possible collapse of Tether would be catastrophic and unknown as the reach of USDT affects the whole crypto market, the collapse of 99% of Luna and the dollar parity loss of UST awoken again the FUD nightmare surrounding Tether.
Tether may have many virtues, but transparency has never been one of them. Recently, Tether opened up part of its backlogs with reassuring data which would prove that its holdings are safe and in fact are “fully backed”. Why now? The pressure exerted by the crisis of Terra may be a reason for this release.
Due to the poor condition of the overall markets and the shockwave of Terra, some market participants began to doubt if Tether also had some rotten reserves backing the principal stablecoin of the market, and prolonged uncertainty is not acceptable in the crypto market.
Due to the opacity of Tether, FUD has been in place for years in the crypto industry. Do you think that being fully transparent by showing a 1:1 backing could clear up your image?
Ardoino: Tether’s position is clear, we are an open book, transparent, and with all the information available to regulators and the general public, this is one of the main reasons for our growth.
Every quarter, Tether releases a Consolidated Reserves Report (CRR) with an accompanying Independent Accountant’s Report using assurance procedures.
The CRR includes detailed rating data about the assets backing USDt. Tether’s website is also updated daily with a summary of its assets and liabilities.
Unlike other stable coins, Tether publishes information about the maturities and ratings of all of our commercial papers. Tether manages a conservative, liquid assets portfolio focusing on preserving our reserves. Tether imposes limits on individual issuers of commercial paper and regional exposure to remain appropriately diversified. Our commercial paper holdings have gone down significantly as a percentage of our reserves shown in our recent quarterly attestation.
Additionally, the latest Fitch Ratings, “Stablecoin Dashboard: 4Q21,” independently states that Tether has the most detailed reporting and affirms that Tether’s portfolio’s liquidity has increased with its reduction of commercial paper. The value of Tether’s reserves is published daily and updated at least once per day.
Tether’s customers continue to trust and have confidence in Tether, as exhibited through the stablecoin’s growth and a market cap of 80bn. They tell the market that Tether’s disclosures are sufficient to make well-informed decisions.
Why doesn’t Tether open their accounts to external and independent audits?
Ardoino: Tether is committed to operating securely and transparently in compliance with all applicable laws and regulations. It is also committed to publishing security certificates every quarter detailing the composition of its reserves. We are constantly working with regulators and law enforcement worldwide to assist them in their investigations.
It seems that the FUD related to Tether may be chronic and may remain for the meantime, Tether is trying to unleash a campaign to diminish these claims against the organisation. Tether has been for many years thriving even whilst having the continuous shadow of the FUD. This may be the past, but what about the future.
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How do you see USDt/Tether in 5 years?
Ardoino: Our prospects for the following year are optimistic. We are eager to work with other countries worldwide to expand our vision and introduce the same opportunities enjoyed in Lugano. We stand ready to work with all governments worldwide to continue down this path as it marks a significant turning point in global finance.
For this reason, we see a world where financial operations are free and with global economic growth thanks to the expansion of Bitcoin, and in this process, Tether will be one of the critical pieces. In addition, we see that the acceptance of cryptocurrencies as a way of payment and storage value is getting bigger.
For good or for bad, depending on whom you speak to, Tether is a paramount piece of the crypto market.
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