Interview with Tether CEO Paolo Ardoino at BTC Prague: Insights on Resilience and Industry Challenges
CryptoSlate’s James Van Straten and I recently spoke with Paolo Ardoino, CEO of Tether, at BTC Prague. In one of his most transparent interviews to date, Ardoino addressed key issues surrounding Tether, such as FUD, its US treasury holdings, and industry competition.
2022: A Year of Challenges and Resilience
Reflecting on 2022, Paolo Ardoino, during our initial meeting at Paris Blockchain Week, highlighted the year’s significant events. He noted both the exit of bad actors from the crypto industry and the opportunity for Tether to demonstrate its resilience.
“When we met in 2022, it was an incredible year for both good and bad reasons. The good was the exit of bad actors from the crypto industry. It also allowed Tether to prove its resilience, which was crucial,” he recounted.
The events of 2022 acted as a trial by fire for Tether, allowing it to demonstrate stability and reliability under pressure. Paolo predicted the downfall of Terra Luna, a competitor in the stablecoin market, which was criticized at the time as competitively motivated. He explained his concerns were based on Terra Luna’s model, which he compared to a “Fugazi” (something fake or insubstantial).
Bank Run and Short Attack on Tether
Paolo detailed a coordinated attack against Tether, where attackers attempted to short the stablecoin and create a bank run to prove insufficient reserves. He described the attackers borrowing large amounts of USDT, selling it at a discount, and creating panic.
“We discovered they had around 7 billion USDT, started selling it at a 1% discount, and created panic, adding another 15 billion to the situation.”
Market makers bought the discounted USDT, redeemed it for full value, and continued this cycle, showcasing Tether’s liquidity and resilience. Tether successfully redeemed about 25 billion USDT in less than a month, highlighting its stability.
Paolo compared Tether’s handling of the attack to traditional banking failures, such as Washington Mutual’s collapse in 2008, emphasizing Tether’s robustness compared to traditional banks.
US Bank Failures and Competitor Issues in 2023
Discussing 2023, Paolo focused on the failures of major US banks like Silicon Valley Bank, Silvergate, and Signature, which affected other stablecoin issuers. These banks failed due to poor risk management and investments in illiquid long-term municipality bonds.
He contrasted this with Tether’s strategy of maintaining a simple and liquid reserve balance sheet, primarily consisting of US Treasury bills. Paolo shared:
“As of today, Tether is the third biggest holder of three-month T-bills in the world, following the UK and Cayman.”
Tether’s substantial holdings in US Treasury bills solidified its relationships with financial institutions like Cantor Fitzgerald, emphasizing the importance of perfect decision-making and these partners’ critical role.
Dealing with FUD and Tether’s Naivety
Paolo acknowledged Tether’s past challenges with FUD, admitting its naivety in believing that good work alone would dispel doubts.
“We thought keeping our head down and working hard would make the FUD go away. We learned the importance of being public and transparent.”
He emphasized the need for transparency and public communication, leading him to take a more prominent role in explaining Tether’s actions and financial health. Paolo reiterated the importance of the “don’t trust, verify” motto, encouraging verification of Tether’s claims.
Discussing Tether’s audit and attestation practices, Paolo highlighted its partnership with BDO for quarterly attestations, ensuring transparency and trust. Regulatory pressures, such as Senator Warren’s call for auditors to avoid crypto companies, pose challenges, but Paolo expressed confidence in Tether’s ongoing efforts to prove its legitimacy.
Paolo Ardoino’s candid conversation with CryptoSlate provided insights into Tether’s battle with FUD and its commitment to Bitcoin, emphasizing its focus on using Bitcoin as a reserve for profits rather than stablecoin backing. The full interview and a series of clips will be published on CryptoSlate’s X account.
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