In a recent interview, Tether's CEO made it clear that USDT plays a vital role in the global financial system, especially in countries facing inflation. He emphasized that Tether supports the U.S. dollar by holding a significant amount of Treasury bills.
USDT started as a cryptocurrency, but now it’s the largest stablecoin by market value. It’s recognized as the most used digital dollar in the world, according to Tether CEO Paolo Ardoino. Bullish, the owner of CoinDesk, is a notable holder of USDT.
Stablecoins, like USDT, are cryptocurrencies pegged to real-world assets. They are essential for crypto trading. They allow users to store value without worrying about the price swings of coins like Bitcoin (BTC). Most stablecoins are tied to the U.S. dollar, but some are linked to other currencies or even gold.
Ardoino pointed out that USDT is more than just a crypto asset. In countries such as Argentina and Turkey, it serves as a lifeline, offering a stable alternative to volatile national currencies. Before USDT, people in these inflation-hit countries often had to turn to the black market to get dollars.
“USDT works much better outside of the U.S.,” he said. In the U.S., there are many ways to access dollars, like banks and payment apps. “But who really needs a dollar?” he questioned, suggesting that USDT is more useful in places with limited access to stable currencies.
This utility is reflected in USDT's market dominance. It boasts a market cap of nearly $120 billion, making it the third-largest cryptocurrency overall, right behind Bitcoin (BTC) and Ether (ETH). USDT is more than three times larger than its closest competitor, Circle's USDC, which has a market cap of $35.6 billion.
Most of USDT—about $61 billion—is issued on the Tron blockchain, while $54.3 billion is on Ethereum, which is popular for decentralized finance (DeFi). Ardoino noted that transaction costs on Tron are significantly lower.
For example, gas fees for a simple swap on Ethereum average around $14.60. In contrast, on Tron, it’s closer to 20 cents. “Imagine someone living in Haiti making $1.34 a day. How can they afford $5 for transaction fees?” he asked. High fees are a barrier for many users in economically challenged areas.
Ardoino also discussed how stablecoins relate to geopolitics, particularly with Treasury bills. These bills back USDT, allowing holders to easily convert it to dollars when needed. The interest from these bills also contributes to Tether's revenue.
While China has been reducing its holdings of U.S. Treasury bills, Tether has been aggressively acquiring them, totaling just over $100 billion. If Tether were a country, its Treasury bill holdings would be comparable to Germany’s and nearing those of South Korea.
“We added resilience to the ownership of the U.S. dollar,” Ardoino explained. Now, there isn’t just one country or decision-maker who can sell off huge amounts of T-bills at once. USDT and Tether are strong allies of the U.S. dollar.
Historically, the transparency of Tether's reserves has raised questions. In the early days, the company faced challenges with banking relationships worldwide, leading to doubts about its backing.
At one point, CoinDesk sought detailed information about Tether's banking connections from the New York State Attorney General, who had obtained this information during an investigation. Initially, the AG resisted CoinDesk's request for transparency, but a judge ultimately ruled in favor of the request.
Now, the situation has improved. Most of Tether's funds are managed by Cantor Fitzgerald, and its CEO, Howard Lutnick, regularly supports the credibility of the stablecoin issuer.
Ardoino confirmed that Lutnick has a clear view of the reserves backing USDT. Tether also undergoes attestations by reputable accounting firms, similar to its competitors.
“Anyone who believes in these conspiracy theories should get out of their mother's basement,” he said, addressing speculation about the adequacy of USDT's backing.
Market sentiment seems favorable. A Polymarket contract estimates a 4% chance that Tether will declare insolvency in 2024. This is lower than the belief that a nuclear weapon will be used this year, which stands at 9%.