Fortune Interview with Tether CEO Paolo: Personal Growth Experience, Is There a Risk with USDT? Bitcoin is the Ultimate Currency

Author | Tether CEO Paolo

Compiled | Wu Says Blockchain Carol

Tether is the world's largest stablecoin issuer, but it is also controversial for various reasons. In recent years, critics have questioned the reserve assets backing its USDT (with a market cap of $90 billion).

However, Tether's new CEO and Bitfinex's CTO Paolo Ardoino stated that while other cryptocurrency companies and even some traditional banks have collapsed, Tether has thrived, and he feels validated.

In an interview with Fortune magazine, Ardoino discussed Bitfinex's strategy in emerging markets and his views on Binance and Changpeng Zhao's settlement with U.S. authorities.

How did you start your career?

I started learning programming at the age of 8. I remember my father bought me an old Olivetti 386 (Olivetti is a historic Italian computer company), and I am Italian. At that time, my father said that buying the computer cost him two months' salary; he was an ordinary employee and also a farmer, so it was a significant expense for him. From then on, I began learning to code, and I have always been excited about building and creating things with code; for me, it is an art form. Through art, you can create universes; through coding, you can do that too. Later, I went to a university in Genoa to study computer science and graduated smoothly from there. I worked as a university researcher for a few years, participating in several very interesting projects. However, salaries in Italy are very low; we create many miracles in Italy, but the compensation is minimal, so I decided to look for other opportunities.

I have always been excited about many things in computer science, particularly about art and programming, open-source, and distributed applications (that was before Bitcoin appeared), as well as resilient networks like BitTorrent. In my private time at university, I cultivated these skills, and then I first worked as a researcher before deciding to explore other avenues. Meanwhile, I developed a strong interest in finance, as I believe finance is one of the things that can control the world. Therefore, I have always been attentive to how finance impacts society. Sometimes I think I am a bit radical, so I decided to delve deeper into finance. To this end, I started working for some hedge funds that needed software built for their hedge funds and portfolio management. Eventually, I ended up in London, where I created my startup. That was around 2012 or 2013, and we had some clients developing software for hedge funds and family offices in the UK and Switzerland.

When did you become interested in cryptocurrency? How did you get involved in it?

Around 2012 or 2013, I heard about Bitcoin and then read the Bitcoin white paper. What excited me first about Bitcoin was the blockchain technology because, in my daily life in finance, I spent a lot of time trying to coordinate data from dozens of different trading venues, custodians, and clearinghouses. This was actually because the technology used by traditional finance was so poor and lagged at least 30 years behind.

The blockchain is beautiful because everyone who has a node sees the same numbers and the same things. The blockchain can help modernize financial infrastructure and technological infrastructure. So I initially viewed Bitcoin from this perspective. A few months later, I began to see Bitcoin as a currency, and possibly the most important currency in the world.

In 2014, I met Giancarlo Devasini, the CFO of Bitfinex. He had an exchange, and I had my startup. After that, I agreed to join and help Bitfinex resolve the bottleneck at the time—the speed of the matching engine, which is the core part of the trading platform. By 2014, Bitfinex was already one of the leading exchanges in the world. Other exchanges at that time included Kraken, Coinbase, OkayCoin, followed by Bitfinex and Bitstamp. Bitfinex was gaining attention due to margin trading, but the matching engine was underwhelming, so my task was to solve this issue.

From 2014 to 2016, I focused solely on the matching engine and improving the speed of the trading platform. In mid-2016, Bitfinex was hacked, and I was invited to serve as its CTO. At that time, I was very confident in my work. I proved that I was someone who could build complex things and deliver quality products; my task was to oversee the entire platform, not just the matching engine.

Can you tell me more about Bitfinex's strategy for expanding in emerging markets?

I believe that emerging markets (developing countries) are where cryptocurrency can truly shine. These countries are more susceptible to the devaluation of their local currencies and inflation. Everyone is affected by inflation, even those living in the U.S. If you live in Argentina or Venezuela, it becomes a much more serious issue. Therefore, we believe it is very important to serve customers who genuinely need help. Of course, Europeans are also very excited about cryptocurrency, but I think, to some extent, selling services to Europeans is like trying to sell ice cream to Eskimos—they don't need it as much. Europe and North America already have the best trading and payment channels in the world.

Tools like Bitfinex Pay and Bitfinex for peer-to-peer transactions are very suitable for emerging markets because they are exactly what people need. Moreover, we firmly believe in the potential of Bitcoin and other cryptocurrencies to create a lifeboat for many living in emerging markets. For example, Argentina has faced multiple defaults, and its legal tender has become burdensome. Imagine a family that saved money for ten years, only for it to suddenly disappear. That is incredibly unfair, right? So I think this is the first time in history that people can choose to exit and make the right choice to protect their families from the wrong decisions made by their central banks.

What are your thoughts on Changpeng Zhao and Binance's settlement with U.S. prosecutors? Does this benefit Bitfinex?

Unlike many competitors, we do not take pleasure in others' misfortunes. I think some CEOs behave arrogantly to some extent, which is very sad. I believe it is important to consider whether your own company can improve rather than hoping for others' decline to help you survive.

Compared to Binance, Bitfinex is a smaller exchange. But we take pride in our compliance work and technology. For a long time, we have turned down various opportunities simply because they were beyond our risk appetite. The situation is not the same for other exchanges that choose to take on more risk. We want to win the marathon, but certainly not by winning through others' falls.

How has it been since you took over as CEO of Tether in October? What is your vision for the company?

Everything is as usual. Whether at Bitfinex or Tether, I have always considered myself not just a developer. In recent years, I started getting involved in company strategy and increasingly participated in strategic execution, becoming the public face of Bitfinex and Tether. Currently, Tether has grown into a behemoth, and I have proven my ability to lead the team.

I believe Tether is a unique company. Over the years, there have always been some people waiting for Tether to collapse, cheering for other companies in the crypto industry. I remember that most mainstream media supported FTX at that time. Of course, now they are all trying to distance themselves from it. Just a year and three months ago, everyone was supporting FTX, and everyone was cheering for Celsius, BlockFi, Voyager, and Genesis, but those companies all collapsed last year.

Even this year, one bank after another has been failing. For example, Silicon Valley Bank, Signature, Silvergate, and Credit Suisse have all gone bankrupt. Therefore, when I hear bankers or others in the crypto industry blame us, I always remind them of the facts.

Tether is the most reliable company in this industry; it has been building innovative stablecoins. Tether's second innovation is a fully reserved bank. All the banks, like Silicon Valley, Silvergate, Signature, and Credit Suisse, have high leverage. For these U.S. banks, they are all leveraging municipal bonds, 10-year, 20-year, and 30-year municipal bonds. While Tether has been under strict scrutiny, it has consistently proven to be reliable (even though Tether holds commercial paper).

Why do you think USDT has grown so much compared to its peers recently?

I think the reason is clear. Our competitors target Wall Street, bankers, and institutions. Just as I said about Bitfinex, the same goes for Tether. If you are in Europe or the U.S., you don’t need a dollar stablecoin. Everyone has a bank account, has a credit or debit card, and can easily obtain loans.

However, there are 3 billion people without bank accounts, excluded from the financial system; it’s not that they are bad people, but they are too poor for any bank to be interested. So we do not serve U.S. customers, nor are we interested in European customers. Our focus has always been on developing countries and emerging markets.

Tether is indeed resilient, but it has not released a full audit. Is there a problem with that?

First of all, none of our strong competitors have conducted a comprehensive audit. Secondly, it’s not that Tether doesn’t want to conduct a full audit. I have publicly stated many times that Tether is undergoing a full audit and is trying to get a large auditing firm to conduct a comprehensive audit. But look at what is happening in the U.S. Congress; they are advising auditors not to accept new crypto clients and crypto-related clients, especially after the FTX incident, as accepting new clients in the crypto space could bring significant liability.

Our proof is also different from our competitors. If you look at the audit details and processes released by BDO, you will see how BDO actually requires our counterparties to directly confirm bank balances. So, they do not just take our word for it; their approach is very thorough. Additionally, we have retained $3.2 billion in excess reserves. We could allocate these billions of dollars; it’s our money, our profits. But we haven’t done so because we are committed to making Tether the most reliable company in the cryptocurrency space and even in the world.

Once again, all banks operate on fractional reserves, while Tether does not. We want to prove that it is possible to be a healthy company and are prepared to retain the vast majority of profits within the company to provide additional assurance to users. We are doing very well in this regard. Of course, we are still committed to working with auditors to obtain an audit, which is our top priority.

What do you think the future of finance is?

I do not believe that cryptocurrency will kill finance. First, I make a significant distinction between cryptocurrency and Bitcoin. For me, Bitcoin is the ultimate currency, a guarantee and lifeboat for anyone wanting to exit the current monetary system. However, the current system has serious flaws, and I do not believe cryptocurrency can save money.

I believe Bitcoin is increasingly entering and being accepted by the traditional financial system. Bitcoin can be used in two ways: through ETFs, through bank products, or if people wish, they can choose to exit and use Bitcoin independently. This is the best guarantee anyone can have, and it is the first time in history that people can truly hold their own money. This is unprecedented and is changing the entire financial industry. I believe Bitcoin will force finance to become more real, more open, and more honest in the coming years. But Bitcoin is a newborn; it takes time, yet I think it is very exciting.