Is Tether The World's Most Valuable Company?

This episode unveils Tether's colossal profitability and strategic maneuvers as CEO Paulo Ardonio navigates the evolving regulatory landscape, particularly the US "Genius Act," while expanding Tether's empire into AI and global infrastructure.

Tether's Reaction to the "Genius Act"

• Paulo Ardonio, CEO of Tether, views the "Genius Act" – a landmark US stablecoin bill recently passed by the Senate – as a positive development. He emphasized Tether's pioneering role in the stablecoin industry since 2014 and sees the US government's legislative efforts as an exciting validation of the technology.
• Ardonio believes the "Genius Act" creates a strong, albeit high-bar, framework for both domestic and foreign stablecoins. The Genius Act is a piece of US legislation aimed at creating a regulatory framework for stablecoins.
• He stated, "I think that genius act is a step in the right direction. It creates a framework... for domestic stable coins as well as foreign stable coins like USDT that could find in their ability to meet the requirements through comparable regimes."
• Tether is confident in USDT's ability to comply as a foreign issuer and is also exploring a "grassroots domestic stable coin" in the US.
• Strategic Implication: Investors should monitor the final form of the "Genius Act" as it will significantly shape the operational landscape for stablecoin issuers in the US and potentially set global standards.

Compliance, Law Enforcement Collaboration, and Financial Strength

• Ardonio highlighted Tether's commitment to compliance and its extensive collaboration with global law enforcement. He pointed to a recent success where Tether's monitoring technology identified a major blockchain scheme, leading to DOJ intervention and fund recovery.
• Tether has collaborated with over 250 law enforcement agencies across more than 55 countries.
• Financially, Ardonio underscored Tether's robustness:
  • Over $125 billion in US Treasuries.
  • Group equity around $176 billion against a $155 billion stablecoin market cap.
  • Approximately $6 billion in excess reserves above the 100% backing for USDT.
• Paulo Ardonio's perspective emphasizes Tether's proactive stance on security and financial stability, aiming to exceed regulatory expectations.
• Actionable Insight: Tether's significant Treasury holdings and proactive compliance efforts could position it favorably under new regulations, offering a degree of stability in the volatile crypto market.

Tether's Strategy Post-"Genius Act" and Market Views

• David Hoffman and Ryan Sean Adams pressed Paulo on Tether's specific plans if the "Genius Act" passes. Paulo clarified Tether's dual approach and his views on the US stablecoin market.
• USDT Compliance: Ardonio confirmed, "Our interest is and I think that even with USDT actually with USDT we plan to follow that pathway to meet the requirements." He cited Tether's profitability ($13.7 billion in 2023, expecting more this year) as a key enabler for meeting these requirements.
  • Tether was the fifth-largest purchaser of US Treasuries last year and is the 18th largest holder globally, comparable to entire countries.
• New Domestic Stablecoin: Despite planning for USDT compliance, Tether intends to launch a separate US domestic stablecoin. Ardonio believes the US market will see a "race to the bottom" on profitability for traditional stablecoin models due to the high efficiency of existing US financial rails.
  • He sees the US domestic stablecoin needing to compete on "programmatability" and "services" rather than yield from reserves.
• Global Focus: Ardonio anticipates most competitors will focus on the US and European markets, leaving a vast global opportunity for Tether, which already serves 450 million users, primarily in unbanked or underbanked regions.
• Strategic Implication: Crypto AI researchers should note the distinction in product strategy: USDT for global, high-yield potential use cases, and a new US stablecoin focused on programmability, potentially integrating with AI-driven financial services.

Competition and Tether's Moat

• The discussion shifted to the influx of new competitors, including major banks (JP Morgan, Citi, Wells Fargo) and tech companies, potentially entering the stablecoin market.
• Paulo Ardonio believes Tether's moat lies in its established distribution networks and grassroots adoption strategy, particularly outside the US.
• He contrasted Tether's approach of "education in the streets" and working with local partners from the "bottom up" with banks that would likely market to their existing customer base.
• "We go we do education in the streets. We work in the streets... we find the partners locally that are aligned with exactly this vision of grassroots adoption from the bottom up."
• Even within the US, Ardonio sees a tier of the population that could benefit from Tether's direct approach, as traditional banking may not serve everyone adequately.
• Actionable Insight: Tether's deep entrenchment in emerging markets provides a significant first-mover advantage and a user base that new, US-focused entrants will find hard to replicate quickly.

Valuation and Public Market Comparisons

• Ryan Sean Adams brought up Circle's (issuer of USDC) post-IPO stock performance (launched at $31, trading at $200) and the speculative multi-trillion dollar valuation for Tether if similar metrics were applied to its $13.7 billion+ annual profit.
• Paulo Ardonio expressed that Tether has no plans to go public, as it doesn't need capital due to high profitability and shareholders are not seeking an exit.
• He acknowledged the impressive valuation multiples for Circle, stating, "if that is comparative that is is that he's a great prize. I mean um we'll see what how you know how long it will last but uh for us couldn't be better."
• Ardonio views Tether's success as an achievement for the entire crypto industry.
• Strategic Implication: The immense profitability of stablecoin issuers like Tether, driven by interest on reserves, highlights a lucrative business model that will attract more competition but also underscores the scale of operations required to succeed.

Winning the Next Phase: Distribution and AI Integration

• The conversation explored how Tether plans to maintain its lead against new, powerful entrants like Big Tech (e.g., Meta with over 3 billion users).
• Ardonio noted that the "Genius Act" might make it difficult for non-financial companies like Meta to issue their own stablecoins directly, potentially forcing them to partner with existing providers.
• Tether's distribution strategy involves:
  • A portfolio of over 100 investments in companies that expand its reach.
  • Partnerships like with Rumble (70 million users) for a potential US domestic stablecoin wallet.
  • Extensive physical touchpoints: "millions of physical touch points around the world," from remittance companies to kiosks in Africa.
  • The Africa kiosk project aims for 100,000 kiosks by 2030, potentially reaching 120 million people with electricity and USDT access.
• USDT.network: This platform showcases Tether's reach, with 440 million estimated users and 30 million new wallets per quarter. Growth was significantly spurred by the 2020 pandemic, as people in emerging markets sought refuge from local currency devaluation.
• AI and Future Growth: Ardonio sees commodity trading as the next big growth vector for USDT. He also believes AI will be crucial. "I think that AI we are going to have one trillion AI agency in the next 15 years and every AI agent should have an studio wallet."
• Actionable Insight for AI Researchers: Tether's vision of AI agents requiring their own wallets and using stablecoins for transactions presents a significant research and development opportunity at the intersection of AI, decentralized finance (DeFi), and payment infrastructure.

Tether Ventures: Diversification and Strategic Investments

• Paulo Ardonio detailed Tether's investment strategy through Tether Ventures, which operates outside the stablecoin reserves.
• Conservative Investments: Land, agricultural companies (e.g., listed company Adiagro in South America), Bitcoin, and gold. This aligns with providing essential resources and leveraging USDT for commodity trading.
• New Technologies - CUAC AI Platform: Tether is building its own peer-to-peer AI platform called CUAC.
  • Ardonio described it as "unstoppable AI," designed to run on any device, adapting to its GPU capabilities.
  • The philosophy: "not your AI not your intelligence," emphasizing user ownership of data and AI models, contrasting with centralized AI services.
• Biotech and Brain-Computer Interfaces (BCIs): Investments in companies like Blackrock Neurotech (to be renamed) focus on BCIs as a hedge against AI risks and a way to enhance human intelligence with local, private AI co-processors.
• Other Investments: Includes an Italian football club (Juventus, though this was a misstatement, Tether is not publicly known to own Juventus; this might be a personal investment or a misunderstanding), media tech, telecom, and energy startups, all with an eye on distribution.
• Strategic Implication: Tether is strategically investing its profits to build a diversified ecosystem that not only supports its core stablecoin business through enhanced distribution but also positions it at the forefront of emerging technologies like decentralized AI and BCIs.

Tether-Specific Blockchains and Wallet Strategy

• The discussion touched upon Tether's investments in Layer 1 blockchains like Plasma and Stable, designed for high-throughput Tether transactions, especially as fees on networks like Tron rise.
• Ardonio clarified: "there is not at our chain and I don't think there will be ever a chain." Instead, Tether supports promising teams and ecosystems.
• Wallet Development Kit (WDK): Tether is developing an open-source WDK (Wallet Development Kit) to allow anyone to build non-custodial wallets.
  • Ardonio revealed, "might launch a wallet on a you know particular crypto network or will it support no? It will support every network... by the end of the year."
  • This wallet (or wallets built with WDK) could feature cross-chain swapping to automatically move USDT to chains with lower fees, incentivizing chains to remain competitive.
• Actionable Insight: The WDK initiative and the potential "Tether wallet" could significantly influence user experience and inter-chain competition, promoting efficiency. AI researchers should consider how such wallets could integrate AI for smart routing or other financial services.

Tether's Relationship with Bitcoin

• David Hoffman highlighted Tether's historical connection to Bitcoin via the Omni layer and its current investments in Bitcoin sidechains like Plasma.
• Paulo Ardonio expressed a strong affinity for Bitcoin: "I love Bitcoin and we as a stat, we love Bitcoin... it's the reason why we enter in this space."
• He values Bitcoin's simplicity, robustness, and its 10-minute block time which he believes ensures accessibility even in low-bandwidth environments, aligning with Tether's financial inclusion goals.
• Treasury Holdings: Tether holds approximately 100,000 Bitcoin in its treasury. Ardonio stated they are unlikely to add other crypto assets to avoid perceptions of favoritism, as Bitcoin is seen as uniquely decentralized.
• Bitcoin Mining: Tether is heavily investing in Bitcoin mining and aims to become "probably, you know, the biggest minor in the world at the end of this year."
  • The rationale is to protect its substantial Bitcoin holdings by contributing to network security.
  • Operations are geographically diverse, including South America and the US.
• Strategic Implication: Tether's significant Bitcoin holdings and mining operations signal a long-term bullish outlook on Bitcoin and a commitment to its ecosystem. This deep involvement could influence Bitcoin's network security and development.

Tokenized Gold (XAUT) and Other Assets

• The conversation covered Tether Gold (XAUT), a tokenized version of physical gold.
• The tokenized gold market is nearly $2 billion, with Tether commanding close to 50%.
• Tether Gold (XAUT) is backed by physical gold stored in Tether-controlled vaults in Switzerland. Each token represents ownership of one fine troy ounce of gold on a specific gold bar.
• Ardonio confirmed, "People can redeem if you have enough gold tokens for one full bar. You can come to Switzerland and you get your own gold bar."
• Tether holds around 80 tons of physical gold in total (between XAUT backing and its own treasury).
• Other tokenized assets like oil or silver are less practical due to storage and value density issues.
• Actionable Insight: Tokenized real-world assets (RWAs) like gold are a growing area. Tether's model for XAUT provides a template for how other valuable, physically-backed assets might be brought on-chain, offering new investment and hedging opportunities.

Global Regulatory Landscape: "Genius Act" vs. Europe's MiCA

• Paulo Ardonio compared the US "Genius Act" with Europe's MiCA (Markets in Crypto-Assets) regulation.
• He criticized MiCA's requirement for stablecoin issuers to hold a minimum of 60% of reserves in uninsured cash deposits in banks, citing the risk demonstrated by the Silicon Valley Bank collapse.
• "We argued before the Mika became low that you should have 100% in treasuries. So that's why the genius act is guess is right."
• Ardonio hopes the "Genius Act" will become a global template, potentially influencing Europe to revise MiCA towards a more treasury-focused reserve model.
• He believes the EU is leaning towards a full CBDC (Central Bank Digital Currency), driven by a fear of dollar stablecoins and a desire to protect the euro, but expressed concerns about the surveillance implications of CBDCs.
• Strategic Implication: The divergence in regulatory approaches between the US and EU could create complexities for global crypto companies. The "Genius Act's" emphasis on treasury-backed reserves, if adopted widely, could bolster the stability and appeal of compliant stablecoins.

Tether's Value Proposition for the US and Crypto

• For the US:
  • Promotes financial inclusion for hundreds of millions globally using the US dollar.
  • Spreads US dollar "soft power" countering efforts by BRICS nations to de-dollarize.
  • Acts as a major purchaser and holder of US Treasuries, supporting US debt markets.
  • Invests significantly back into the US economy.
• For Crypto: Despite past FUD (Fear, Uncertainty, Doubt), Ardonio pointed to Tether's consistent growth as evidence of its foundational role and utility within the crypto economy.
• Paulo Ardonio's concluding remarks frame Tether as a strategic ally to the US in promoting its currency globally and a vital infrastructure provider for the crypto world.

Conclusion

This episode reveals Tether's transformation into a financial powerhouse, leveraging its massive profits to expand beyond stablecoins into AI and global infrastructure, all while preparing to navigate the US "Genius Act." Crypto AI investors should monitor Tether's AI initiatives like CUAC and its WDK, which signal a future where AI agents and decentralized applications increasingly rely on stable, programmable digital dollars.