During the time when FTX and other industry giants were struggling, most areas of the cryptocurrency world were in turmoil. However, Tether stood out and showed a thriving trend.
Tether’s stablecoin USDT market capitalization soared to $111 billion, three times that of its closest competitor, USDC, issued by Circle, headquartered in Boston. Tether’s business is enviable because its funding source is essentially free, as the higher interest rates on US Treasury bonds (which make up the majority of the reserves supporting its stablecoin) provide the company with free funding. Unlike traditional banks, customers who deposit hard currency into Tether in exchange for USDT do not receive any interest.
In just the first quarter of 2024, Tether reported unaudited “financial performance” of $4.5 billion and net assets of $11.4 billion. In 2023, the company reported a net profit of $6.2 billion, making it likely the most profitable company in the cryptocurrency industry today. In comparison, Coinbase, the largest cryptocurrency exchange in the United States, reported annual revenue of $3.1 billion and a profit of $95 million in 2023, with a net income of $1.2 billion in the first quarter of 2024, mainly due to the rise in cryptocurrency prices. Thanks to its partnership with Circle, approximately 20% of Coinbase’s 2023 profits came from interest earned from the reserves supporting the stablecoin USDC.
With abundant funds, Tether is now focusing on growth beyond stablecoins. Last month, the British Virgin Islands-based company announced a strategic reorganization that includes the establishment of three new departments: Bitcoin mining, artificial intelligence, and education.
Paolo Ardoino, Tether’s new CEO, said, “The idea of cryptocurrencies eliminating intermediaries can be applied to many other areas.” He has been the company’s Chief Technical Officer and spokesperson since 2017.
Tether’s expansion plans go beyond cautious business diversification; it’s a philosophical question. “We believe that 90% or even more of technology is built for the best-case scenario, but no one builds technology for the worst-case scenario,” said the 40-year-old Ardoino. “If a disaster happens – I’m not saying it will, but anything can happen – and we are not prepared for it.”
Cryptocurrency historians will remember that Bitcoin was created by Satoshi Nakamoto in response to the 2008 financial crisis when there was widespread doubt about the stability and reliability of the existing global financial system. Ardoino believes that Tether will play a crucial role in creating what he calls sovereign technology that empowers people.
Ardoino said, “Having elastic money is great, but if you only have elastic money and everything else is centralized, then it will be destroyed quickly. One of our mottos is ‘Built for Doomsday.'”
Paolo Ardoino grew up on a family farm in northern Italy. He started programming at the age of eight and later studied computer science and mathematics at the University of Genoa. After graduating in 2008, Ardoino became a military project researcher at Selex Communications, an electronics and information technology company, focusing on highly available resilient networks and encryption technology.
To explore opportunities outside of Italy, he moved to London around 2013 and soon established Fincluster, a startup that builds cloud-based financial applications for advisors, fund managers, and institutions in London, Milan, and Lugano. In October 2014, one of his clients introduced him to Giancarlo Devasini, the Chief Financial Officer of Tether and its sister cryptocurrency exchange Bitfinex. Devansini invited Ardoino to help expand the Bitfinex platform, which was becoming increasingly popular.
Ardoino was soon appointed as the technical director of both companies and became the spokesperson for Tether due to the low-key approach of Devasini and CEO Jean-Louis van der Velde. According to Forbes’ billionaire rankings, these three, along with Chief Legal Officer Stuart Hoegner, later became billionaires.
In December of last year, Ardoino officially took over Tether while retaining his position as Chief Technical Officer of Bitfinex. He is also responsible for the strategy of Holepunch, a technology platform that allows developers to create serverless applications, launched by Tether, Bitfinex, and infrastructure platform Hypercore.
Ardoino stated that Tether’s ownership structure has not changed. Chief Financial Officer Devasini remains the company’s largest shareholder, and former CEO van der Velde still participates as an advisor. However, this has not stopped Ardoino from planning a new direction for Tether. Last month, the company announced a restructuring into four departments to develop its expanding business focus:
1. Financial department, responsible for managing USDT and overseeing the upcoming digital asset tokenization platform.
2. Data department, responsible for strategic investments in emerging technologies, including artificial intelligence and peer-to-peer platforms.
3. Hashpower department, focused on Bitcoin mining and energy-related businesses.
4. Education department, supporting education and leadership programs.
Tether has made progress in each of these areas. Last year, the stablecoin giant invested $1 billion in a Bitcoin mining operation called “Volcano Energy” in El Salvador, which will be powered by solar and wind energy. Tether has also established its own Bitcoin mining farm in Uruguay. In September of last year, Tether revealed that it had spent $420 million to purchase 10,000 Nvidia H100 graphic processing units (GPUs) from German-listed Bitcoin miner Northern Data. These GPUs are typically used by artificial intelligence companies that need to process large amounts of data. In exchange, Tether received a 20% stake in the company, which plans to lease these chips to AI startups. Another interesting investment by Tether was in April when it spent $200 million to acquire a majority stake in Blackrock Neurotech, a biotechnology company in Salt Lake City that manufactures brain implant chips designed to enable people with neurological disorders or paralysis to “eat, drink, operate robotic arms, and send emails through their thoughts.”
According to Ardoino, Tether’s staff doubled last year to around 100 people, and he personally interviews every applicant. “I don’t want yes-men,” Ardoino said. “I want people to tell me what they think about Tether and what we’ve done right and wrong.”
Regarding Bitcoin mining, Ardoino’s goal is to capture 5% of the market share, which would place them among the top global miners. “If you think of Bitcoin as the ultimate form of money, built for the end of the world, then you don’t want most of Bitcoin mining concentrated in one country. So, the way to achieve that goal is to invest in different regions,” he explained. “We start from South America and plan to expand to different regions worldwide to ensure the decentralization of Bitcoin mining.”
“In terms of competition in Bitcoin mining, it’s about how much capital you can put in. They have already invested around $500 million. With that kind of funding, you can go a long way,” said HC Wainwright analyst Kevin Dede. Adam Sullivan, CEO of publicly traded Core Scientific, added, “They are now the largest investors in the Bitcoin mining space. It makes sense for them because it’s the real driver behind their business growth.” Sullivan referred to the fact that Tether’s profits have been boosted by the recent surge in Bitcoin prices, given its holdings of a large amount of digital assets. If Bitcoin prices continue to rise, mining Bitcoin will expand profits.
However, despite Tether’s significant progress in Bitcoin mining, entering the field of artificial intelligence will pose greater challenges. In addition to making deals with companies like Northern Data, Tether is also seeking internal development by building large-scale models and integrating artificial intelligence capabilities into existing products. Job listings for AI engineers and AI research managers are listed on Tether’s website. “I think AI can play a bigger role and not be influenced by the political biases of the few elite running the world’s largest AI projects,” Ardoino said. He referred to most companies currently driving AI development, including Microsoft, OpenAI, and Google. “We believe that AI should be free from intermediaries, just like money should be free from intermediaries.”
Rob Toews, partner at Radical Ventures, expressed skepticism about Tether’s move into AI. “Acquiring GPUs and leasing them to AI companies is an easier strategy to enter, but I find it hard to imagine Tether becoming a reliable competitor in building multimodal AI models.”
Through its education department, Tether will offer courses and workshops covering blockchain technology as well as AI, coding, and design. The company has already partnered with the Georgian Digital Industry Academy and Bitkub, Thailand’s largest local exchange, to carry out several programs. Ardoino said, “Education is the cornerstone of this journey and is key to promoting economic prosperity and sustainable development.”
Given the chaotic history of cryptocurrencies and Tether’s failure to produce audited financial statements, there are reasons to be concerned about the source of funding for its new investments. According to the company’s financial statements, the majority of its $4.52 billion profit in the first quarter came from the returns on its Bitcoin and gold positions. Ardoino insists that Tether’s investments come from its profits, not its customer reserves.
Austin Campbell, adjunct professor at Columbia Business School and blockchain company advisor, said, “If people think they are starting to dip into customer reserves to invest in these things, Tether could quickly go down. I’ve always said the problem with Tether is not how much they currently hold, but how much they might hold in the future because they are unrestricted.”
Campbell also warned that Tether’s dominant position in stablecoins is far from guaranteed in the long term. “With the introduction of stablecoin regimes, with the regularization of regulations, Tether will have to start complying with these regimes locally or leave those jurisdictions.”
Tether’s dominant position has already been challenged. According to data from DefiLlama, although USDT still holds a 69% share in the stablecoin market, its transaction volume lags behind. According to analysis by payment giant Visa and enterprise blockchain data platform Allium Labs, Circle’s USDC had a transaction volume of 178.6 million in April 2024, surpassing USDT’s 173.9 million.
Furthermore, a recent report by S&P Global Ratings shows that a new bipartisan stablecoin bill introduced by Senators R-Wyo and DN.Y. in April would limit the issuance of stablecoins by institutions without banking licenses to a maximum of $10 billion, which could stimulate competition from traditional banks.
“We believe that all these investments are crucial for Tether… We believe these investments can change the lives of people in emerging markets and developing countries. We want to be leaders in human evolution,” Ardoino said.
