Tether CTO reveals the truth about stablecoin reserves

Tether CTO reveals truth about stablecoin reserves.

Compiled and Edited by: Deep Tide TechFlow

LianGuaiolo Ardoino is the Chief Technology Officer of Tether. In this conversation, LianGuaiolo and host Pomp will discuss the rise of stablecoins, fund management, ensuring the actual support of the US dollar peg, regulation and auditing, banks, FDIC insurance, and more, taking us through everything about Tether and stablecoins.

Host: Pomp, Anthony Pompliano

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Speaker: LianGuaiolo Ardoino, Chief Technology Officer of Tether

Podcast Source: Anthony Pompliano

Original Title: “Tether Founder Reveals Truth About Reserves”

Show: Link

Air Date: September 19

The Rise of Stablecoins

Regarding the rise of stablecoins, LianGuaiolo mentioned that stablecoins were initially designed for cryptocurrency traders to help them transfer fiat currencies between different exchanges. However, with the outbreak of COVID-19 and the depreciation of national currencies, especially in emerging markets such as Turkey, Argentina, and Venezuela, stablecoins are increasingly seen as a lifeline for developing country communities.

Pomp mentioned that in the face of economic instability and currency depreciation, Bitcoin has long been seen as a solution, especially in countries facing economic difficulties, Bitcoin is seen as a safe haven. LianGuaiolo believes that although Bitcoin is a relatively new form of currency compared to other traditional currencies, it is being accepted by a wide range of people. Bitcoin represents ultimate financial freedom, and people need more time to understand and accept it.

Pomp mentioned the existence of various USD-backed stablecoins in the market. Regarding the competition between stablecoins, LianGuaiolo believes that an industry cannot have only one player, diversity is a key factor, which can not only provide users with more choices but also increase the industry’s resilience and better resist various risks.

LianGuaiolo further pointed out that diversity provides a good case for regulatory agencies. If the stablecoin industry has only one player, regulatory agencies may have reasons to shut it down. But diversity can demonstrate that this is a genuine and evolving industry, not just a company’s business.

Tether’s Risk Management

LianGuaiolo explained that Tether attaches great importance to risk management and has a dedicated team responsible for monitoring the market and understanding the microeconomics. The team’s main task is to continuously track market dynamics, ensure that Tether’s investment strategy aligns with the market environment, and remain vigilant to potential risk factors. He emphasized that their team is highly focused on protecting the portfolio.

LianGuaiolo mentioned that in 2022 and 2023, Tether faced a series of attacks, but at the same time demonstrated its strong liquidity and redemption capabilities. It successfully redeemed $7 billion within 48 hours and more than $20 billion in the following 20 days.

LianGuaiolo pointed out that when considering that $7 billion represents 10% of its reserves, and $20 billion represents 25% of its reserves, this redemption capability is particularly prominent. Tether has successfully met a large number of redemption requests in a short period of time without causing significant impact on its reserves.

LianGuaiolo discussed the role of FDIC insurance in stablecoins. He pointed out that although FDIC insurance provides some peace of mind for ordinary consumers, it is not a reliable solution for large companies like Tether. Tether prefers to use short-term US Treasury bonds because these bonds can be returned to holders in the event of bank bankruptcy.

Note: FDIC insurance is provided by the Federal Deposit Insurance Corporation (FDIC) in the United States. It covers various deposits but does not cover other financial products. Its main purpose is to protect depositors’ funds in the event of bank bankruptcy or other financial crises.

Tether’s Investment Diversification

Regarding the source of Tether’s profits, Tether currently has a market value of $83 billion, and the company has accumulated over $3.3 billion in additional reserves in the past few quarters. LianGuaiolo pointed out that although the current high interest rate environment is favorable for Tether, this situation will not last forever.

LianGuaiolo mentioned that Tether’s investment portfolio holds about $1.5 billion in Bitcoin. Despite Tether having over $3.3 billion in additional capital, even if the value of Bitcoin becomes zero, Tether still has funds exceeding the total value of its issued tokens. Additionally, Tether also holds gold as part of its reserves.

LianGuaiolo emphasized that the world is full of uncertainty, and Tether hopes to provide additional protection to users by diversifying its investment portfolio. Considering the large amount of US Treasury bonds held in its reserves, the company is considering small-scale asset diversification.

LianGuaiolo mentioned that although Tether has previously stated publicly that it is undergoing an audit, this process has taken a long time for various reasons. LianGuaiolo emphasized that Tether is always committed to improving its transparency and has made significant progress in improving transparency.

Tether’s Diversified Development

LianGuaiolo pointed out that Tether’s goal is to support blockchain with practical use value, and supporting too many blockchains would increase management complexity, especially when most of these blockchains have low transaction volumes. For example, Tether was initially issued on the OmniLayer, and over time, Tether started issuing USDT on Ethereum and later chose to issue on Tron as well.

In Africa and South America, due to the high transaction fees on Ethereum, people tend to prefer using Tron. Although there are now more second-layer solutions such as Arbitrum and Optimism, Tron is still the preferred choice for many users as it provides simpler and lower-cost transaction options.

Pomp mentioned that with the popularity of stablecoins, major banks and other financial institutions may enter this field. LianGuaiolo believes that major banks may collaborate to create a common stablecoin instead of each creating their own stablecoin. Central Bank Digital Currencies (CBDCs) may face more challenges in Western countries, as they may replace cash and potentially lead to negative interest rates.

LianGuaiolo mentioned that Tether is expanding its stablecoin business and at the same time, it is also expanding into other areas such as energy production, Bitcoin mining, and communications. Tether’s ongoing educational projects are not only related to cryptocurrencies but also involve other fields. LianGuaiolo stated that they firmly believe that the informatization of education is a key point for future human development, and therefore Tether is also investing in this area.

LianGuaiolo mentioned that Tether is carrying out educational projects that are not only related to cryptocurrencies. They firmly believe that the informatization of education is a key point for future human development. They recognize the importance of digital technology, online education platforms, and other educational technologies in future education, so they have decided to invest in this area.

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