9 years, 90 billion dollars: The money printer Tether and the "most hardworking CEO in crypto"

Written by: Daniel Kuhn @ Consensus Magazine

Compiled by: Qin Jin, Carbon Chain Value

After a promising year with a potential profit of $4.5 billion, the newly promoted CEO of Tether is seeking to diversify the company's investments.

The "wise opinions" of educated or influential elites in the cryptocurrency industry suggest that Tether, the manufacturer behind the world's largest stablecoin USDT, has been unfairly defamed but may ultimately fail. USDT is not only the most successful stablecoin (an asset designed to maintain a stable value based on blockchain) but can arguably be considered the most successful cryptocurrency product to date. While USDT's market capitalization may not match that of BTC or ETH, the two largest freely floating cryptocurrencies, it far surpasses them in trading volume. Therefore, if USDT collapses as some expect, it will fall hard.

People use Tether. It is used for trading, hedging, transferring, payments, bridging, exchanging, valuation, and accounting. In other words, Tether functions like a currency. Its usage is similar to that of the US dollar. In fact, this is the crux of the issue—USDT created by Tether brings the US dollar on-chain, and now, because the dollar is on a constantly running and globally accessible blockchain, it can be used anywhere in the world at any time.

What's the big deal? Ask the so-called Tether truthers (those who believe the company is being maliciously slandered), and they might point out other uses of Tether. Tether is sometimes used for bribery, sanction violations, and money laundering. Some say Tether is also used to prop up the inflated valuations of the entire cryptocurrency market. Those who are skeptical of Tether often simply repeat various claims made since Tether's inception in 2014 to show contradictions.

Claims about how Tether anchors its equivalents have changed over time—from initially being the US dollar to now being dollar equivalents—raising questions about the reasons, methods, and implications. In many ways, Tether's business structure is simple: it absorbs funds and issues USDT. Its operation is no different from banks or money market funds in traditional financial markets. The biggest concern for this largest stablecoin manufacturer is equally simple: does it really hold the collateral it claims to hold?

Paolo's Promotion

All these concerns now rest with Paolo Ardoino, who was promoted to CEO of Tether this year. Ardoino is a company employee. For many years, he has been the public face of the company, which has sometimes faced criticism for its lack of communication and clear management. Before his promotion, Ardoino was the Chief Technology Officer of Tether and its subsidiary cryptocurrency exchange Bitfinex (he still holds the CTO position at Bitfinex). He has worked at both companies since their inception, initially as a senior software developer.

There is compelling evidence that Ardoino is one of the hardest-working individuals in the cryptocurrency space. Look at his GitHub. His code contributions this year amount to 3,275 (for a full-time engineer, 2-3 contributions per day is considered average), and in 2017, his submission count reached 37,720. In addition to running Tether and writing code for Bitfinex (which was once the largest exchange), Ardoino also founded Holepunch and serves as its Chief Strategy Officer, a peer-to-peer communication platform he conceived with friends five years ago.

In an interview, he stated, "I have no hobbies outside of what I am doing." He mentioned martial arts training, which allows him to avoid logging onto a computer all day. "I really have no other hobbies."

Some work to live, while others live to work. Ardoino belongs to the latter group. Since becoming CEO this year, he has been striving to adhere to standards, keeping his hands and mind active, and continuing to write code. Ardoino leads a department within Tether similar to a "moonshot" team, consisting of about 25-30 engineers responsible for developing and researching tools he believes could one day make banking and the world better. The team has already produced results, notably the decentralized video calling application Keet running on Holepunch.

"Becoming the CEO of Tether required a process. For months, we have been openly discussing this transition with the board and other management," Ardoino said in an email statement. "For some time, I have considered myself not just a developer."

The department does not have a formal name but can be compared to some past corporate research parks, such as the telecommunications subsidiary formerly known as Bell Labs (which gathered many renowned engineers and helped establish the modern internet) or Google's X innovation division. Only Ardoino envisions his department not only as a profit-making entity but also as one that benefits other businesses. The team focuses on Bitcoin node infrastructure and artificial intelligence, as well as other technologies with commercialization potential.

"This is a well-considered approach," he mentioned, noting that the company invests about 10% of its cash into R&D. Although some of Ardoino's other business initiatives are almost "charitable" in nature, Tether expects its Bitcoin mining operations to "make money." He said they are trying to position themselves in such a way that they will not be able to do harm in the future because they are building technology that everyone can use. He referenced Google's now-famous slogan "Don't Be Evil."

Humble Beginnings

Ardoino hails from a small village in northern Italy and has sharp blue eyes reminiscent of Frank Sinatra. He specifically mentions that Genoa is the "home of pesto and focaccia." He developed an early love for computers. He recalls his first computer: an Olivetti 386 from around 1991, with 4MB of memory and a 3.5-inch floppy disk port. It ran the MS-DOS operating system. He remembers his father telling him that the computer cost him several months' salary. He was advised to use it carefully.

"I was so excited that I told all my friends at school," Ardoino said. "I remember my math teacher responding to me, saying that computers were just a waste of money and time and would never be useful to people." He lived far from his friends and enjoyed spending afternoons on the computer. He grew tired of existing applications like Microsoft Word and Paint. He taught himself to code so he could create his own games.

"I have no hobbies outside of what I am doing"

He was an early Linux user. He drew inspiration from the writings of Linus Torvalds (the founder of the open-source operating system), who released software for free online and invited people to try to improve it. This idea resonated with Ardoino because it was a game where everyone could win. He also read Richard Stallman's "GNU Manifesto" (which remains a foundational document of the free software movement) and Eric Raymond's "The Cathedral and the Bazaar," which argues that code should be open and freely accessible (like a bazaar) rather than closed and top-down (like a cathedral). Asimov is his favorite author.

"From the outside, the bazaar may seem chaotic and noisy—not poetic at all—but if you are in it and observe closely, the bazaar is extremely efficient," he said. "You can take a part of the bazaar away, but it remains a bazaar; it is flexible and resilient, while the cathedral is 'monolithic.'" Bitcoin, which emerged a decade after Raymond's writings, is bazaar software.

Ardoino attended university close to home in Genoa. He studied computer science and applied mathematics. He participated in student groups hoping to work in Linux and developed a strong interest in distributed computing, parallel computing, and peer-to-peer systems.

"BitTorrent was really precious to me," he recalled, remembering the time the software was released, just as he remembers the launch of many peer-to-peer applications. He can recall the specifications of file-sharing software, from Gnutella to Napster, to BitTorrent, Kazaa, and Limewire, as some might recall British kings and queens.

As his university career was coming to an end, he participated in a three-person research project studying "resilient networks," which allow people to communicate even in the worst-case scenarios. He loved the work but hated the pay. "As an Italian, your salary is not high." So he began looking for other opportunities.

He taught himself finance and economics. In 2011, he landed his first job at a hedge fund, designing and calibrating trading systems. In 2013, he moved to the regional financial center of London, running his own startup that developed trading software products for hedge funds. According to his LinkedIn profile, the company was called Fincluster. "It was a small startup, but we did very well."

His Team

Tether's leadership is a tightly-knit team. Ardoino met former plastic surgeon Giancarlo Devasini in London in 2014. Devasini is now Tether's CFO and was operating Bitfinex at the time, offering Ardoino a job. Stuart Hoegner, a Canadian known on Twitter as @bitcoinlawyer, has served as Bitfinex's legal counsel since 2014. Former CEO Jean-Louis van der Velde has also been with Bitfinex since the beginning and remains an advisor and CEO.

This is the team that brought Tether to market, although the project's concept was initially incubated by the Mastercoin team, led by entrepreneur, aspiring politician, and former child actor Brock Pierce under the name Realcoin. Pierce's founding team included William Quigley, Reeve Collins, and Craig Sellars, who exited the project early on. In a sense, Tether's original idea was to provide a stopgap for many companies in the "Bitcoin 2.0" (the name used at the time for the cryptocurrency industry) that struggled to access banking services.

Tether was deposited in banks and offered users private dollar equivalents. Its initial promise was to hold a corresponding amount of fiat reserves to match the number of tokens in circulation. It is believed that many of its early banking relationships were established with banks in Taiwan, which used Wells Fargo's correspondent services (in 2017, Tether sued Wells Fargo after the bank cut off its access). Tether has been accused of falsifying invoices and contracts to obtain and maintain banking relationships, and New York regulators found that the company used accounts associated with its executives and "friends of Bitfinex."

The owner of Bitfinex is Hong Kong-based Ifinex, while Tether's owner is Singapore-based DigiFinex. A Tether spokesperson clarified that these are different entities that share some common shareholders but operate independently. The spokesperson stated in an email, "This distinction is crucial for transparently and accurately reflecting our corporate structure."

"For us, this is true, and we know we are lucky," Ardoino said in an interview. "We are all simple people, and we have made a lot of money in the company." Although it hasn't been all smooth sailing.

Essentially, Tether has been plagued by redemption issues since its inception. In a 2021 episode of "Odd Lots," convicted fraudster Sam Bankman-Fried (who owned Alameda Research, a hedge fund known to be a major user of Tether at the time) described the redemption process as straightforward, though occasionally marred by minor issues.

The company has struggled to maintain banking channels—sometimes using Noble Bank, which had ties to Pierce, sometimes using the Montreal Bank (reportedly Hoegner's bank), and a "shadow bank" called Crypto Capital Corp—though it has maintained a relationship with Deltec in the Bahamas for several years now.

Ardoino stated that one of the most stressful moments in his career was shortly after the collapse of the Terra/LUNA algorithmic stablecoin project founded by Do Kwon. At that time, hedge fund Fir Tree Capital Management was heavily shorting Tether, publicly betting that the company would fail. The collapse of Tether's decentralized competitor UST triggered a contagion elsewhere, leading to a surge in withdrawals.

"I think we were in good shape," Ardoino said. The company processed about $7 billion in withdrawals within 48 hours and over $20 billion in the following 20 days, roughly 25% of the company's total holdings at the time. "It was a very interesting moment. In fact, I enjoyed that moment," he reflected. "It forced us to prove to the world that we are indeed reliable."

Money to Spend

Tether is flush with cash at least this year. Its market capitalization is just under $90 billion, hitting an all-time high, with an estimated nearly $90 billion available to deposit in high-yield bank accounts and make cautious investments. Nowadays, this primarily means investing in US Treasury bonds, which are generally considered risk-free. But it also invests in slightly riskier asset classes, such as repurchase agreements, money market funds, and higher-yield corporate bonds. This year, the company directly invested over 1% of its assets in Bitcoin, a first for the company.

Tether had previously invested in commercial paper from Chinese companies but later ceased doing so.

"We have a bit of money to invest," Ardoino stated. In the first quarter of this year, Tether reported a net profit of $700 million in a voluntary disclosure. In the second quarter: $850 million. In the third quarter: over $1 billion. Ardoino noted that as interest rates rise, the profits from the stablecoin business are unprecedented.

As the largest stablecoin, Tether's position has never been supplanted. However, around this time last year, compared to competitors like Circle's USDC, Binance's BUSD, and MakerDAO's DAI, Tether was losing market dominance (though Tether has never dominated the DeFi market, as DAI holds sway there). This is partly due to regulatory headwinds and a controversial reputation.

In 2021, the New York Attorney General found that Tether had not consistently "honestly" disclosed its reserve assets. Tether paid a $18.5 million fine for this. The same year, the Commodity Futures Trading Commission also made similar allegations and fined the company $41 million for making false statements about its backing and bank accounts.

In October of this year, Tether claimed to have $3.2 billion in excess reserves—enough to cover every dollar Tether must pay when customers withdraw from the platform.

Tether also charges fees for withdrawals of $1,000 (minimum $100,000). Ardoino stated that he is actively involved in deciding how the company allocates reserve funds and which projects to invest in.

Investing in Infrastructure

Under Ardoino's leadership, Tether positions itself as an infrastructure provider. The company has made significant investments in Bitcoin mining, hydroelectric facilities in Uruguay, and geothermal facilities in El Salvador, all aimed at providing power for Bitcoin mining.

He mentioned that his "Skunkworks" team is developing a Bitcoin node communication channel using the P2P protocol Keet, which will help "coordinate and manage miners, containers, and energy production." The system is called Moria (a reference to The Lord of the Rings, of which Ardoino is a fan), positioning itself as a combination of Bitcoin mining and the "Internet of Things."

"If you think about mining, that's an interesting aspect because you have thousands of mining machines and hundreds of thousands of sensors—temperature sensors, oil temperature sensors, wind sensors, light sensors. Everything is a sensor. And there are containers. They all generate data and contribute to the stability of the system," he said.

While Ardoino does not have time to micromanage the team, he is hands-on in R&D. He stated that he personally wrote the first version of Moria. "I think it's important to show others what you want rather than just telling them. I like to be on the front lines. I enjoy guiding and demonstrating my experience," he said.

Clearly, he has many ideas about how to apply this communication technology. Ardoino discussed the hypothetical establishment of alternatives to chat applications like Telegram and WhatsApp. He said Keet could economically meet these companies' needs for infrastructure and scalability. "Each Telegram user costs about 90 cents a year," he said while roughly calculating server costs.

He stated, "Even if Keet has a billion users… BitTorrent proved this, a few hundred million users of Keet would incur no costs." It is peer-to-peer. Keet currently does not generate revenue. But Ardoino seems willing to bear this cost temporarily, stating that only 20 people are currently developing the software, which means an annual cost of about $4 million, at least for Tether.

Tether AI

In fact, servers are likely a concern for Ardoino, as Tether recently invested in the EU data company Northern Data. Northern Data is a company with a notorious reputation in Bitcoin mining. When asked about this, Ardoino laughed and said, "We are the most criticized company in the world; what right do I have to comment?"

Ardoino stated that this decision was also based on genuine business considerations, including Northern's deal with Nvidia, which positions it to become "the largest AI infrastructure provider in Europe if you exclude Google, Amazon, and Microsoft."

He said Northern Data would serve every European company. Every car manufacturer in Europe is striving to compete with Tesla, and every shipping company in Europe is working to optimize routes, etc. Everyone is begging for AI infrastructure.

Tether also has a small department with fewer than five employees researching artificial intelligence to see if there are useful applications for the company and whether it can build its own cost-effective large language model, i.e., LLM (the technology behind contemporary AI). Ardoino noted that Bitfinex and Tether have employees in 60 different countries, and he is particularly interested in whether AI can help meet the company's translation needs.

Ardoino said, "We are just beginning this process… We want to truly understand it before scaling. Of course, the operational costs of AI infrastructure are very high, and even a company like Tether, which is expected to profit over $4 billion this year, may soon find itself living off its reserves (or raising funds from Microsoft)."

Ardoino is a fan of Asimov, known for his utopian visions of AI, and he said that AI has the potential to cause "the greatest social upheaval humanity has faced since the Industrial Revolution."

It could enrich a few companies at the expense of the majority, undermine privacy as a human right, and lead to mass layoffs.

While Ardoino criticizes aspects of the Italian lifestyle, he retains some European humanist ideals. He stated that Tether would not fire employees simply because "AI improves efficiency." He said, "People have families; finances are not the only important thing."

Stopping Soon?

Ardoino has only been at the helm for a few months and does not seem inclined to stop anytime soon. However, compared to most cryptocurrency companies, Tether faces greater regulatory headwinds, which may not be his choice. Several sitting U.S. senators have singled out the company, calling it a potential threat to national security. The U.S. Treasury has hinted that it is also keeping an eye on the business.

Of course, this is not new. Tether has previously undergone regulatory scrutiny but has only been lightly slapped on the wrist. At that time, the company was smaller but had more burdens to deal with. When Tether promised to hold all reserves in US dollars, it did indeed lie to the public, but it does not make that promise now. Moreover, if it ever operated with partial reserves (i.e., reserves less than deposits), it is likely no longer doing so.

Ardoino did not respond to questions about potential regulatory actions or whether the company still intends to complete an audit.

"I do not plan to stop the work I am doing today. Throughout my life, I have always loved technology and science. I see the work I can do alone and the amazing projects I can accomplish with a team. Even in challenging times, I can wake up happily. I feel fortunate to have such an opportunity. It allows me to plan and build many ideas I have dreamed of. There is still much to do," Ardoino wrote in an email.

Whether Tether stops due to market risks or global regulators, one thing is clear. After nearly a decade without a proper vacation, Ardoino likely needs a break.

"I have never been to Japan. Japan is the country that created the first gaming console and video games. They have an amazing culture. I think exploring and experiencing other cultures is one of the richest opportunities in life," he said.