The Pomp Podcast - #1442 Paolo Ardoino | Bitcoin Is The Perfect Currency Says Tether CEO

Episode Date: November 22, 2024

Paolo Ardoino is the CEO of Tether. This episode was recorded at Crypto Investor Day in New York. In this conversation we discuss, stablecoins, growth metrics, institutional adoption, how investors can benefit from stablecoins, possibility of Tether going public, why bitcoin is the perfect currency, and how stablecoins will impact central banks.  ======================= Bitkey, built by the team behind Square and Cash App, makes bitcoin self-custody easy and secure. Compare prices across exchanges, send and receive bitcoin, and track your wallet—all in one app. Named a Time Best Invention of 2024, Bitkey’s three-key system replaces seed phrases for simplicity. Get it now for $99—$51 off. Order at Amazon, Best Buy, or ⁠bitkey.world⁠. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat

any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. behind Square and Cash App, BitKey makes securely managing your Bitcoin absurdly simple. BitKey is integrated with partners like Cash App, Coinbase, Robinhood, and blockchain.com. So you can easily compare prices across exchanges

before you buy or sell. And their app works like the money apps you already use because simplicity is the best form of security. Send, receive, and track your wallet value over time, all in one place. Time Magazine named BitKey one of the best inventions of 2024. Their simple three-key approach to self-custody

replaces complex features like seed phrases that make traditional wallets hard to use and easy to lose. Give the gift of simplified self-custody to the Bitcoin person in your life. And if that's you, get BitKey and sit back and relax while the sats stack. For a limited time, you can get BitKey for $99. That's $51 off the normal price. Get yours today online at Amazon, Best Buy, or bitkey.world. That's B-I-T-K-E-Y.world. Go check out BitKey today and start securely managing your Bitcoin in an absurdly simple way. All right. Next up, we have Paolo, who's the CEO of Tether. Unfortunately, Paolo is not able to be here in person, so he is joining us remotely. They have an event that is going on in Switzerland.

Paolo, how are you? I'm great. Can you hear me well? I can hear you perfectly. You look amazing. You sound amazing. We're ready to learn from you. thank you thank you for having me of course uh maybe where we can start is tether is obviously the dominant stable coin um how much of this adoption and usage is happening internationally outside the united states versus inside the us and do you guys see any differences in the use cases or the trends uh in different geographies well you know i i like to describe you know our role as a stable coin issuer as very, very important for certain regions of the world. Tether is not selling and onboarding U.S. customers.

The reason for that is simply that in the U.S., there are 15, 20, 30 different ways to pay for things. There is PayPal, Cash App, Venmo. People have bank accounts, debit cards, credit cards. You know, even with debit cards, my understanding is that from latest numbers is that $1.4 trillion could be taken as theft on debit cards. Now, imagine trying to go outside the U.S. and Europe and stop anyone in the streets and ask a simple question. Would you prefer your local national currency or the U.S. dollar? and 99% of the people will tell you, will answer the US dollar. There are 5 billion people in the world that live in high inflation countries

and there are 3 billion people in the world that don't have a bank account. These are not bad people. These are just people that are too poor of interest of banks. They generate too few commissions per year. They don't generate $100, $200 of commissions per year for the banks in order for the banks to be attracted to these segments of users and community. So think about Turkey, where the local national currency, the Turkish lira, has lost 80% of its value against the US dollar in five years,

or the Argentina, Peso in Argentina, lost 98% of its value against the dollar. So if you look at all those different environments, you as a company, as a private company like Tether, You have to decide where you want to go, where you want to pick your battles. And honestly, other than fighting against like 50 other different payment methods in Europe or the US, we should go where there are people that don't have other options just because the only option that they had before was just cash. And cash is not very helpful when you want to create a future for your family. And in a way, I like to describe, you know, the trying, if a stablecoin issuer would sell, you know, stablecoins into the US, to me, it's like, you know, trying to sell an ice bucket to an Eskimo, right?

It could be controversial, but, you know, in my opinion, and, you know, I never heard a person in Wall Street, you know, complaining of the fact that they could not move money from one account to another. and you can hear an enormous number of people saying that they have, at the end of the month, they don't have any way to store wealth. They don't have, never had in their lives a saving account nor a checking account, right? So basic single things. We talk about financial inclusion.

We talk about all these type of things, but for someone that looks at the emerging markets, feels like many companies that are talking about financial inclusion are doing it just as a marketing pitch, while with Tether, we are actually focusing on those regions because they are the ones that need our product the most.

I recently saw a study that came out, I think it was from your head of economics. He said that there was 330 million on-chain users of Tether and that obviously doesn't account for people on the exchanges. And so do you have an estimate for how many users are using this? And then also, what numbers can you share in terms of transaction volumes

or just signals as to how big this has now become? Yeah, so we have seen more than 130 million wallets on-chain, but there are tens of millions of people that are using USDT only on centralized exchanges, so they will not pop up on the blockchain analysis. And if you think about people that live in emerging markets, they honestly don't care about which blockchain, they don't care if it's Ethereum, they don't care if it's Tron, they need just the digital dollar

because for them the dollar is the best currency in the world and it's actually the best currency fiat currency in the world right the best currency in the world we all know that it's Bitcoin. Now the other really staggering statistic is that Philip Gradwell is our head of economics and the former chief economist at Chainalys, you know, evaluated also what is the pace of growth of new wallets and usage of USDT on-chain alone. Again, it's harder when it comes to centralized exchanges. But on-chain, we are seeing more than 30 million new wallets per quarter. And trust me, I asked him many times to review the number because it blew my mind. So the number of USDT wallets are growing. I'm repeating myself at 30, more than 30 million per quarter. It's almost

insane. And I asked myself why this is happening. And unfortunately, it's kind of a sad realization. This is happening because the success and the growth and this almost parabolic growth of adoption of USDT across emerging markets and developing countries is directly proportional to the failure of many economies around the world. And sure, I mean, if you are a private company, it brings good value, good numbers, but the feeling that we have, and it's not great because it means that

there is something that actually is not working in the world and likely we are providing an option. So I'm glad that Tether is around providing an option, a lifeline to many communities, but it means that what is being attempted in the current state of the global finance is not very healthy. So one of the things that surprised me as I looked more and more into the stablecoin market is just how much institutions are either already using stablecoins or trying to use stablecoins.

I think the story historically has been like these are individuals exclusively using this technology. Talk a little bit about institutional adoption. What are these people doing at these organizations with stablecoins? And do you see stablecoins eventually becoming the dominant preferred method for moving money for institutions? Well, I think that one of the most interesting trends of stablecoins is going to be, and is being already now, it's adoption by commodity traders for international trade. The beauty of it is that the stablecoins are running on transparent transport layer called blockchains. The beauty of blockchain is that information stored there cannot be cancelled. So you cannot, whatever you do, it will remain like that for the rest of the time, for the rest of the time.

So, you know, sometimes when you use banking rails, information is opaque, can be changed, can be tampered with. With blockchain, you cannot do that. And blockchains are faster, are cheaper, has a much better way to move money. It's more efficient. and so it's definitely one of the winning case cross-border payments and commodity trading like buy cotton selling cotton you know oil and so on is going to be very stable coins are going to be a fundamental part of that transactional volume one of the questions i continue to get from people and my brain is too small to figure this out so hopefully you can help us is okay i believe that

stable coins are going to be much bigger in the future, how do I make money off of the trend? Because in most areas in crypto, if I think that Bitcoin is going to be bigger, I buy Bitcoin. If I think a smart contract platform is going to be bigger, I buy that token. A stable coin is worth only $1. And so most people would love to be an investor in your business. You seem to have a great business with lots of profit, probably one of the best businesses in the world. But what are the other ways that you think people can benefit as investors from the rise of stable coins? I think, well, definitely, Tetherhead has a great business, but we've been living in this business for 10 years. I think you know how many challenges and attacks that we had to defend and controversy and so on.

The good thing about our company is that we stay focused. Of course, now that works, everyone wants to jump on the bandwagon, and it's understandable. right so i think that you know the future will uh will bring so many different stable coins with different flavors and options and i think it's great right i'm very humbled that the technology that data created 10 years ago is now being used by central banks uh or potentially you know and you know banks regional banks um and is actually creating new opportunities i think that um think about just the remittances business when in in general if you think about the emerging markets developing countries around between 10 and 20 percent of their gdp is remittances and the

opportunity there is actually to build technology that leverages stablecoin to remove the unnecessary intermediaries from the equation of remittances saving a lot of money to the poor people that for For example, imagine a person that lives in Philippines or has a family in Philippines and go to Europe to work and accrue some money over the month to try to send part of that money back to the Philippines to help the family. That is the concept of remittances. So already put yourself in the shoes of a person that works and spends the entire month and years and years far from the family. So this person now is charged 5%, 6%, 10%, 20% to send money on a digital ledger because money for most of it is already digital. So these people are charged a lot of money in an unfair way. So I think that the next step for entrepreneurs is actually leveraging what the new opportunity that stablecoins are bringing to create actually programmable money that serves different use cases and set from remittances, cross-border payments, commodity trading, trading in general, online global effects markets, on-chain, and the opportunities are actually endless.

There are also, again, I see many other stablecoins trying different things. For example, there are stablecoins that are looking to provide or share the yield from investments back to the holders. In my opinion, it's quite risky because it could lead to consider that specific stablecoin as security. I know that some of our competitors are doing it. um and uh but i you know that people are point being is that people are trying different different approaches because it seems like a very very hot topic um that this uh the profitability of running a stable coin when we mentioned that you have a great business and maybe one of the best businesses in the world uh my back of the napkin math is you do something like 60 million dollars in profit per

employee which would put you at a 60x metric of some of the greatest technology companies like Facebook, Google, et cetera. So you guys make a lot of money. You have a very small team relative to the performance there. There's many people both in this room and globally who would love to be a shareholder in Tether. Is there any plans for you to ever go public or somehow allow for people to participate in the equity of Tether? Well, I don't want to be unpopular. I think that's one of them. I think a company should go public when they have problem in or they need to access capital. So they need to increase the size of the company and they want to invest in the company. And rightfully so, they go public to have

better access to that type of liquidity. To me, Tether made in the last two years $12 billion in profits, of which most of the profits, the vast majority, has to remain in the company and went into further investments to create distribution networks, to purchase distribution networks, also invest in other areas from artificial intelligence and other parts by the way all outside of the reserves right so these investments are outside of the reserves of the stablecoin just to be clear now the point of going public to me is that you know i think that tether to me is the

once in 100 years opportunity is a company that is um very profitable is run by people that love bitcoin is run by people that love freedom they love we love um the concept of independence in this intermediation and resilience so being public feels to me that it will impair our ability to move fast to take decision disruptive for the status quo and for the you know the establishment of the traditional financial work so you know i like uh the liberty that gives me to not have to be worried about the grade that I will get after three months or every quarter by analysts that don't see my vision and they don't have my passion

to try to help the unbanked, the hundreds of millions and billions of unbanked in the world. That is my primary concern. Look, I mean, 10 years ago, Tether started with a simple idea. And if you have told me back then that we would become so big, I would then I would, you know, ask you if we're, you know, you know, mental, because it's no one could predict this growth and this rapid growth. And we are very content of the results that we made. To us, it's much more important the mission that we have. And, you know, the fact that with the learnings that we had from the stablecoin, from USDT, but also from Bitcoin, we can implement

them in other aspects of the technology, from the telecommunication. Telecommunication, social media is also intermediated, for the most part is completely unnecessary intermediation. Education is too intermediated. Artificial intelligence is already very politicized and very, very intermediated. And so I think that the learnings that we had from Bitcoin and the USDT and the success we had can be and apply to different areas.

And so that's why I want to remain independent and keep focusing on that because it's the right thing to do, especially for all the countries that don't have the same luck of the US and Europe. One of the things you said that may surprise people is that you're a big supporter of Bitcoin. I think people look at in crypto,

if you are involved with a coin or a chain, there's a little bit of tribalism. There's a little bit of competition that goes on. But you all don't just talk about being supporters of Bitcoin. We don't have enough time to list all of the things you all have done for Bitcoin, funding of developers, etc. But talk a little bit as to the relationship you see moving forward between Bitcoin and kind of the store of value and then stable coins like Tether. Bitcoin to me is the perfect currency, right?

Especially in the last 50 years, fiat money has been governed by humans in a way, right? So especially after 1971, when the gold backing was removed from fiat currencies, we have seen over and over different decision makers taking decisions, monetary policy decisions on how to change, you know, the effects of like money printing and so on. And to me, Bitcoin is money, is the only form of currency governed by math. In our universe, we have two things that are pretty solid. One is physics, but even physics, there is a difference. There is quantum physics and there is the general relativity. And we don't know yet how the two things could combine together. So still with physics, we have some, we don't understand it completely.

But math is different. We can prove math and cryptography is math. And we know that math is there and it is perfect and can resist to the wrath of God. So it's not a subject. It is not dependent from the changes of humor and the interests of humans. So at least we need to have at least one certainty in our life. And when it comes to protecting wealth, preserving wealth, and that is Bitcoin. Bitcoin.

Now, as big Bitcoin proponents, we go around the world and we do education. The reality of things is that most of the people that we talk to in poor countries, they don't have, and rightly so, they don't have the time of us geeks, in a way, to understand Bitcoin, understand all the implications and understand how it works. But they understand one thing very well, that the US dollar is better than their currency. So what we are thinking about is how we can anyway use USDT as a way to onboard people on a digital wallet and over time guide them through education towards Bitcoin, the best asset in the world. My last question for you is, you're not a central bank, you're not a country, but you have a lot of people who are holding dollars. there's a strong argument. You are increasing dollar dominance globally. Stablecoin issuers collectively have become one of the top 15 or 16 buyers of treasuries and so has become a net new buyer, which is really important to the US government that wants to sell debt. But there's

a lot of people who would say, why doesn't the government just nationalize, whether it's Circle or Tether or name a popular stablecoin? What do you think the relationship between nation states, central banks and stablecoin issuers will be moving forward. And if you were in one of these countries in a position of influence or in the central bank, what would you do as you see the rise of stablecoins? Well, it's always about balance, right? So when you are a stablecoin issuer like Tether, you'll ask yourself questions. Of course, you need to be in a situation where you are helpful and you are net positive for the world and also you are net positive for governments. As of today, for example, we have around 100 billion in U.S. Treasuries.

We are not a country, but if we were a country, we would be the 18th country in the world for how many TBLs and Treasuries we hold. And I think that another functionality that we proved to the world, actually not many think about this feature of USDT, is that we know how China, for example, sold many T-bills in the last few years from $2 trillion to now less than $800 billion, I think. And one of these issues that that situation presented is the fact that usually with governments holding other governments, foreign governments holding your own debt, you have single decision makers deciding to press a button and start decreasing their exposure to, for example, the U.S. debt.

The interesting thing that the USDT created is actually the decentralization of the decision-making of selling the U.S. debt. For every person that is in Argentina, every person that is in Turkey that are holding or buying USDT, we take that money and we buy a piece of it. but will not make the decision altogether to sell their USDT or hence to dispose of the U.S. debt. So the level of resilience that USDT is bringing to the U.S. dollar and the U.S. debt is unprecedented. So that is one of the least understood features to me, but it's also one of the best. But on the other side, so we are helpful to the US, but on the other side, you know, there is the argument that, of course, other countries where the population are using USDT a lot might feel in a different way.

So they might be upset that there is an expanded dollar dominance. But the reality is that, you know, people are looking for always for better alternatives. In the poorer countries, people try to buy gold chains or, you know, gold rings or whatever. People will always try to find a way to protect themselves and their families from inflation and their local currency. So I had personally and as a group, we had so many discussions with central banks and the ministers of finance of different emerging markets. And actually, they were very, very excited because on one side, you could see how people in these countries are turning to USDT to have an edge against inflation. But on the other side, the amount of remittances that are being sent into these countries in USDT is enormous. we're seeing that already a percentage on average that is above um four percent below ten percent

usually of dollar remittances that are going in on a yearly basis now uh on into emerging markets is already down in usdt so if you want to see the reason why usd is so big it's not about crypto trading anymore is actually you know is is becoming in the transport of wealth across continents. Paulo, thank you so much for taking the time to do this. I know you guys have a huge event going on yourselves. And so I think that from everyone here, also thank you for all the work you guys have done, not only in getting stable coins into the hands of hundreds of millions of people, but also all the work you've done around Bitcoin. You guys probably deserve more credit than you get. And so we appreciate it. Thank you. Thank you very much for having me.

We'll be right back.