Original title: "Podcast Notes | Conversation with Tether CTO: Revealing the Truth about Stablecoin Reserves"Original source: DeepTech TechFlow

Paolo Ardoino is the Chief Technology Officer of Tether. In this conversation, Paolo and host Pomp will discuss the rise of stablecoins, fund management, how to ensure that the peg is actually supported by the US dollar, regulation and auditing, banks, FDIC insurance, and more, taking us through everything about Tether and stablecoins.

Presenter: Pomp, Anthony Pompliano.

Speaker: Paolo Ardoino, Chief Technology Officer of Tether

Podcast source: Anthony Pompliano

Original title: "Tether Founder Reveals Truth About Reserves"

Program: Link 

Broadcast date: September 19th.

Stablecoin's Rise

Regarding the rise of stablecoins, Paolo mentioned that stablecoins were initially designed for cryptocurrency traders to help them transfer fiat currency between different exchanges. However, with the outbreak of COVID-19 and the devaluation 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, where Bitcoin is seen as a safe haven. Paolo believes that although Bitcoin is a relatively new currency compared to other traditional currencies, it is being accepted by a large number of people. Bitcoin represents ultimate financial freedom, and people need more time to understand and accept it.

Pomp mentioned the existence of various stablecoins backed by the US dollar in the market. Regarding the competition between stablecoins, Paolo believes that an industry cannot have only one player, diversity is a key factor. This not only provides users with more choices but also increases the industry's resilience and ability to resist various risks.

Paolo further pointed out that diversity provides a good example for regulatory agencies. If there is only one player in the stablecoin industry, regulatory agencies may have reason to shut it down. However, diversity can demonstrate that this is a real and developing industry, not just a company's business.

Tether Risk Management

Paolo explained that Tether places great importance on 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 trends, ensure that Tether's investment strategy is aligned with the market environment, and remain vigilant about potential risk factors. He emphasized that their team is very focused on protecting the investment portfolio.

Paolo 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.

Paolo pointed out that Tether's redemption ability is particularly outstanding when considering that $7 billion represents 10% of its reserves, and $20 billion represents 25% of its reserves. Tether has successfully fulfilled a large number of redemption requests in a short period of time without causing too much impact on its reserves.

Paolo 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 enterprises like Tether. Tether prefers to use short-term US Treasury bonds, which can be returned to holders in the event of bank bankruptcy.

Editor's 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 failure or other financial crises.

Tether Investment Diversification

Regarding the profit source of Tether, the current market value of Tether is 83 billion US dollars, and the company has accumulated more than 3.3 billion US dollars in additional reserves in the past few quarters. Paolo pointed out that although the current high interest rate period is favorable for Tether, this situation will not last forever.

Paolo mentioned that Tether's portfolio holds approximately $1.5 billion worth of Bitcoin. Despite having over $3.3 billion in additional capital, Tether would still have more funds than all of its issued tokens combined even if the value of Bitcoin were to drop to zero. Additionally, Tether holds gold as part of its reserves.

Paolo emphasized that the world is full of uncertainty, and Tether hopes to provide additional protection for 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.

Paolo mentioned that although Tether had previously publicly stated that it was undergoing an audit, the process took a long time due to various reasons. Paolo emphasized that Tether has always been committed to improving its transparency and has made significant progress in this regard.

Tether's Diversified Development

Paolo 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 the blockchains have low transaction volume. For example, Tether was initially issued on the OmniLayer, and over time, Tether began issuing USDT on Ethereum and later chose to issue on Tron as well.

In Africa and South America, due to the high transaction fees of Ethereum, people tend to use Tron instead. Despite the availability of more second-layer solutions such as Arbitrum and Optimism, Tron remains the preferred choice for many users as it offers simpler and lower-cost transaction options.

Pomp mentioned that with the popularity of stablecoins, large banks and other financial institutions may enter this field. Paolo believes that large banks may collaborate to create a common stablecoin instead of each bank creating its 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.

Paolo mentioned that Tether is currently working on educational projects that are not only related to cryptocurrency. They firmly believe that the digitization of education is a key factor in human development in the future. They recognize the importance of digital technology, online education platforms, and other educational technologies in future education, and have decided to invest in this area.