As FTX and other industry giants faltered, much of the cryptocurrency world collapsed. However, Tether stood out in this storm, showing a robust growth trend.
Tether’s stablecoin USDT surged to a market capitalization of $111 billion, three times that of its closest competitor, USDC, issued by Circle, headquartered in Boston. Tether’s business is enviable because it sources its funds essentially for free, thanks to the higher interest rates on US government bonds, which make up the majority of the reserves supporting its stablecoin. 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 field today. In comparison, Coinbase, the largest cryptocurrency exchange in the United States, had annual revenue of $3.1 billion and a profit of $95 million in 2023, with 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 reserves supporting the stablecoin USDC.
With abundant funds, Tether is now focusing on growth beyond stablecoins. Last month, the company, based in the British Virgin Islands, announced a strategic restructuring that includes three new departments: Bitcoin mining, artificial intelligence, and education.
Paolo Ardoino, CEO of Tether
Tether’s newly appointed CEO, Paolo Ardoino, said, “The idea of cryptocurrencies eliminating intermediaries can be applied to many other fields.” He has been the company’s Chief Technology Officer and spokesperson since 2017.
Tether’s expansion plans go beyond cautious business diversification; they are philosophical. “We believe that 90% or even more of technology is built for the best-case scenarios, but no one builds technology for the worst-case scenarios,” said the 40-year-old Ardoino. “If a disaster happens—I’m not saying it will happen, but anything can happen—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 skepticism about the stability and reliability of the existing global financial system. Ardoino believes Tether will play a crucial role in creating what he calls sovereign technology that empowers people.
Ardoino said, “Having a resilient currency is a good thing, but if you only have a resilient currency and everything else is centralized, it will be destroyed quickly. One of our mottos is ‘Built for the end of the world.'”
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 for the electronics and information technology company Selex Communications, focusing on high-availability resilient networks and encryption technology.
In search of opportunities outside Italy, he moved to London around 2013 and soon founded Fincluster, a startup that built 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 gaining popularity.
Ardoino was soon appointed as the Chief Technology Officer of both companies, and with Devasini and CEO Jean-Louis van der Velde’s low-key approach, Ardoino became the spokesperson for Tether. According to Forbes’ billionaire rankings, these three, along with Chief Legal Officer Stuart Hoegner, later became billionaires.
In December last year, Ardoino officially took over Tether while retaining his position as Chief Technology Officer of Bitfinex. He is also responsible for 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 is still involved as an advisor. But this has not stopped Ardoino from planning a new path for Tether. Last month, the company announced a restructuring into four departments to develop its expanding business focus: the Finance department, responsible for managing USDT and overseeing the upcoming tokenization platform for digital assets; the Data department, responsible for strategic investments in emerging technologies, including artificial intelligence and peer-to-peer platforms; the Hashpower department, focusing on Bitcoin mining and energy-related businesses; and the 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 in El Salvador called “Volcano Energy,” which will be powered by solar and wind energy. Tether has also established its own Bitcoin mining facility in Uruguay. In September 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 handle large amounts of data. In exchange, Tether received a 20% stake in the company, which intends to rent out the chips to AI startups. Another unconventional investment by Tether was its acquisition of a majority stake in Salt Lake City-based biotech company Blackrock Neurotech for $200 million in April. Blackrock Neurotech manufactures brain implant chips aimed at enabling people with neurological disorders or paralysis to “eat, drink, operate robotic arms, and send emails through their thoughts.”
According to Ardoino, Tether’s employee count 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 did right and wrong.”
Regarding Bitcoin mining, Ardoino’s goal is to capture a 5% market share, which would put Tether among the top global miners. “If you think Bitcoin is the ultimate form of currency, built for the end of the world, then you wouldn’t want most of the Bitcoin mining concentrated in one country. So, the way to achieve this goal is to invest in different regions,” he explained. “We start from South America and plan to expand to different regions globally to ensure decentralized Bitcoin mining.”
“In terms of competition in Bitcoin mining, the key is how much capital you can deploy. They have deployed 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 company Core Scientific, added, “They are now the biggest investors in the Bitcoin mining space. It makes sense for them because it’s the real driver of their business.” Sullivan referred to the boost in Tether’s profits due to the recent surge in Bitcoin prices, considering Tether holds a significant amount of digital assets. If the price of Bitcoin continues to rise, mining Bitcoin will expand profits.
However, while Tether has made significant strides in Bitcoin mining, venturing into the field of artificial intelligence presents greater challenges. In addition to striking deals with companies like Northern Data, Tether is also seeking internal development, building large-scale models and integrating AI capabilities into existing products. Job listings for AI engineers and AI research directors are listed on Tether’s website. “I believe AI can play a bigger role, and it won’t be influenced by the political biases of the few elites 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 AI should be free from intermediaries, just like currency should be free from intermediaries.”
Rob Toews, a partner at Radical Ventures, expressed skepticism about Tether’s move into AI. “Getting GPUs and renting them to AI companies is an easier strategy to get into, but I find it hard to imagine Tether becoming a credible competitor in the field of building multimodal AI models.”
Tether will offer courses and workshops covering blockchain technology, as well as AI, coding, and design, through its Education department. The company has already partnered with the Georgian Digital Industry Academy and Bitkub, Thailand’s largest local exchange, for several initiatives. 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 lack of audited financial statements, there are concerns about the source of funds for its new investments. According to the company’s financial proof, 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, an adjunct professor at Columbia Business School and a blockchain company advisor, said, “If people perceive that they are starting to dip into customer reserves to invest in these things, Tether could quickly fall. I’ve always said the problem with Tether isn’t how much they hold now, but how much they could 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, while USDT still holds a 69% share in the stablecoin market, its transaction volume lags behind. According to an analysis by payment giant Visa and enterprise blockchain data platform Allium Labs, Circle’s USDC had a transaction volume of 178.6 million transactions in April 2024, surpassing USDT’s 173.9 million transactions.
Furthermore, a recent report by S&P Global Ratings shows that the new bipartisan stablecoin bill proposed 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. This could stimulate competition from traditional banks as Tether’s competitors.
“We believe 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.
