Inside USDT’s ongoing battle with FUD – Tether CEO Paolo Ardoino Exclusive



CryptoSlate’s

James
Van
Straten
and
I
sat
down
with
Paolo
Ardoino,
the
CEO
of
Tether,
at
BTC
Prague
this
month.
In
one
of
Paolo’s
most
transparent
to
date,
he
addressed
several
critical
topics
related
to
Tether,
including
FUD
surrounding
Tether,
its
holdings
in
US
treasuries,
and
competition
in
the
industry.

2022:
A
Year
of
Challenges
and
Resiliency

Paolo
reflected
on
2022
when
I

first
met
him
at
Paris
Blockchain
Week,
labeling
it
as
significant
for
both
good
and
bad
reasons.
He
acknowledged
that
while
the
year
saw
the
exit
of
many
bad
actors
from
the
crypto
industry,
it
also
provided
Tether
an
opportunity
to
demonstrate
its
resilience.
He
recounted:

How To Get Free Crypto  

“When
we
met
it
was
I
think
2022
was
an
incredible
year
for
good
and
bad,
in
my
opinion.
The
good
thing
is
that
many
actors
that
were
eventually
recognized
as
bad
actors
have
left
the
crypto
industry
for
good.
It
also
was
a
good
moment
for
Tether
to
prove
its
resiliency.
And
that,
in
my
opinion,
is,
was
very,
very
crucial.”

Paolo
noted
that
the
events
of
2022
served
as
a
trial
by
fire
for
Tether,
allowing
it
to
prove
its
stability
and
reliability
under
pressure.
At
the
time,
he
publicly
predicted
the
downfall
of
Terra
Luna,
a
competitor
in
the
stablecoin
market.
He
faced
criticism
for
this
prediction,
as
many
believed
competitive
interests
drove
his
comments.
He
explained:

“At
the
conference
at
the
Blockchain
Week
in
Paris
in
2022,
was
before
the
Terra
Luna
fallout.
I
publicly
said,
I
think
Terra
Luna
is
going
to
go
bust.
And
I
was
criticized
about
that
because
people
were
telling
me,
oh,
of
course
you
are
saying
that
because
it’s
your
competitor
is
going
to
eat
your
lunch.”

He
clarified
that
his
concerns
were
based
on
the
inherent
issues
he
saw
in
Terra
Luna’s
model.
According
to
Paolo,
Terra
Luna’s
stablecoin
was
backed
by
another
token
they
created,
a
structure
he
compared
to
a
“Fugazi”
(something
fake
or
insubstantial).
He
contrasted
this
with
Tether’s
principle
of
ensuring
they
could
always
redeem
its
stablecoin
for
its
face
value,
emphasizing
the
importance
of
liquidity
and
reliability
for
stablecoin
issuers.

Bank
Run
and
Short
Attack
on
Tether

Paolo
detailed
this
led
to
a
coordinated
attack
against
Tether,
where
attackers
attempted
to
short
the
stablecoin
and

create
a
bank
run
to
prove
that
Tether
did
not
have
sufficient
reserves.
He
explained
that
these
attackers
borrowed
large
amounts
of
USDT
and
sold
it
at
a
discount,
aiming
to
cause
panic
and
a
rush
for
redemptions.
Paolo
described
the
situation:

“So
we
discovered
that
they
had
around
7
billion
USDT
and
they
started
selling
it
at
1
percent
discount
and
and
also
they
started
creating
panic.
So
they
had
7
billion
plus
all
the
panic
that
they
could
gather
was
around
another
15
billion.”

He
illustrated
how
market
makers
bought
the
discounted
USDT,
redeemed
it
for
its
full
value,
and
continued
this
cycle,
demonstrating
Tether’s
ability
to
handle
massive
redemptions.
He
highlighted
that
Tether
successfully
redeemed
about
25
billion
USDT
in
less
than
a
month,
showcasing
its
liquidity
and
resilience.

Coinbase Banner  

The
Tether
CEO
drew
parallels
between
Tether’s
successful
handling
of
the
attack
and
traditional
banking
failures,
specifically
mentioning
Washington
Mutual’s
collapse
in
2008.
He
used
this
comparison
to
emphasize
Tether’s
robustness
compared
to
traditional
banks.
Paolo
stated:

“And
there
is
no
better
trial
by
fire
than
that,
right?
So
to
prove
that
when
banks
failed,
we
saw
Washington
Mutual
in
2008.
They
failed
and
they
were
asked
to
redeem
10%
of
the
money
of
the
reserves.
They
failed.
They
went
bankrupt.”

By
highlighting
Washington
Mutual’s
inability
to
redeem
a
significant
portion
of
its
reserves,
Paolo
spotlighted
Tether’s
capability
to
manage
large-scale
redemptions
without
faltering,
proving
its
financial
stability
in
challenging
situations.

US
Bank
Failures
and
Competitor
Issues
in
2023

Paolo
transitioned
to
discussing
the
subsequent
events
of
2023,
focusing
on
the

failures
of
major
US
banks
like
Silicon
Valley
Bank,
Silvergate,
and
Signature,
where
other
stablecoin
issuers
had
relationships.
He
pointed
out
that
these
banks
failed
due
to
poor
risk
management,
specifically
its
investments
in
illiquid
long-term
municipality
bonds.
Paolo
mentioned
that
a
major
competitor
of
Tether
had
significant
uninsured
cash
deposits
in
Silicon
Valley
Bank,
leading
to
a

depeg
when
the
bank
failed.
He
elaborated:

“By
the
way,
they
failed
because
they
were
investing
the
majority
of
their
reserves
in
long
term
municipality
bonds.
Like,
imagine
take,
we
are
in
Prague
now,
imagine
take
like
ten,
tens
of
small
towns
outside
Prague
and
imagine
that
billions
and
billions
of
dollars
are
invested
in,
in
10,
20,
30
years
municipality
bonds.”

Paolo
contrasted
this
with
Tether’s
strategy
of
maintaining
a
simple
and
liquid
reserve
balance
sheet,
primarily
consisting
of
US
Treasury
bills.
He
shared
an
interesting
metric
about
Tether’s
holdings:

FreeBitcoin Banner  

“As
of
today,
is
the
third
biggest
owner.
Holder
of
three
months
T
bills
in
the
world.
First,
there
is
UK.
Second,
there
is
Cayman
for
all
the
hedge
funds.
Third,
there
is
Tether.”

Paolo
discussed
how
Tether’s
substantial
holdings
in

US
Treasury
bills
have
helped
solidify
its
relationships
with
key
financial
institutions
and
custodians,
such
as
Cantor
Fitzgerald.
He
emphasized
the
importance
of
perfect
decision-making
in
managing
large
sums
of
money
and
these
partners’
critical
role
in
Tether’s
operations.
Paolo
explained:

“When
you
move
from,
10
billion
to
112
billion
as
of
today,
the
game
changes,
right?
So
you
have
to
be
perfect,
right?
You
have
to
be
perfect
all
the
time.
You
have
to
make
sure
you
take
every
single
decision.”

He
highlighted
Cantor
Fitzgerald’s
support
and
credibility,
noting
how
its
CEO
publicly
endorsed
Tether’s
financial
stability,
significantly
contributing
to
the
trust
and
confidence
in
Tether
within
the
financial
community.

Dealing
with
FUD
and
Tether’s
Naivety

Reflecting
on
Tether’s
past

challenges
with
FUD
and
how
it
had
to
change
its
communication
strategy
to
address
public
concerns
and
improve
transparency,
Paolo
acknowledged
its
previous
naivety
in
believing
that
merely
doing
good
work
would
eventually
dispel
doubts.
Paolo
stated:

“I
understand
that
part
of
the
FUD,
the
Tether
FUD,
was
also
due
to
the
fact
that
we
were
naively
thinking
that
we
could
just
keep
our
head
down,
work,
and
if
we
were
proving
that
we
were
doing
good
to
the
world
and
that
we
were
useful,
all
the
FUD
would
go
away
eventually,
right?”

He
emphasized
the
importance
of
being
more
public
and
transparent
about
its
operations,
which
led
him
to
take
a
more
prominent
role
in
communicating
Tether’s
actions
and
financial
health.
Paolo
reiterated
the
importance
of
the
“don’t
trust,
verify”
motto,
encouraging
people
to
ask
questions
and
seek
verification
of
Tether’s
claims.

Paolo
discussed
Tether’s
audit
and
attestation
practices,
specifically
its
partnership
with
BDO
for
quarterly
attestations.
He
highlighted
the
thoroughness
and
diligence
BDO
applies
in
scrutinizing
Tether’s
operations,
which
helps
ensure
transparency
and
trust.
Paolo
explained:

“Look,
really
openly
doing
attestation
on
a
stablecoin,
especially
if
the
stablecoin
is
named
Tether,
of
course
brings
a
lot
of
attention
and
a
lot
of
risk
management.
Rightfully
so,
right?”

He
also
mentioned
the
challenges
posed
by
regulatory
pressures,
such
as
Senator
Warren’s
call
for
auditors
to
avoid
crypto
companies,
making
it
difficult
for
Tether
to
secure
a
full
audit
from
a
Big
Four
firm.
Despite
these
challenges,
Paolo
expressed
confidence
in
its
ongoing
efforts
to
prove
Tether’s
legitimacy
and
financial
health.
He
conveyed
gratitude
for
public
endorsements
of
its
economic
practices,
which
have
helped
mitigate
some
skepticism
around
Tether’s
reserves.

Paolo
Ardoino’s
frank
and
open
conversation
with

CryptoSlate 
gave
insights
into
Tether’s
battle
with
FUD
from
powerful
adversaries
and
its

commitment
to
Bitcoin,
stating
that
it
was
focused
on
using
Bitcoin
as
a
reserve
for
profits
rather
than
stablecoin
backing.
The
full
interview
will
be
published
along
with
a
series
of
clips
on


CryptoSlate’s

X
account.

Mentioned
in
this
article

Go to Source
Author: Liam ‘Akiba’ Wright


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