Tether's USDT Has Uses Beyond Crypto Markets, Trading: CEO Paolo Ardoino

Ardoino said there's more of a need for stablecoins outside the U.S., especially in countries with rampant inflation and shoddy financial infrastructure.

Stablecoins, a type of cryptocurrency pegged to a real-world asset, are designed to provide a stable store of value within the crypto market, reducing the volatility associated with cryptocurrencies like bitcoin (BTC). Most stablecoins are linked 1:1 to the U.S. dollar, while others are pegged to other currencies or assets, such as gold.

However, Tether's USDT is not limited to the crypto market. According to Tether CEO Paolo Ardoino, in an interview with Bullish CEO Tom Farley, the stablecoin is also widely used as an alternative to national currencies, especially in countries with high inflation and weak financial infrastructure.

Ardoino explained that before the widespread adoption of USDT, people in inflation-stricken countries had to turn to the black market to obtain dollars. However, with USDT now available, they can easily acquire a dollar-denominated asset without resorting to illegal activities.

"In the U.S., there are 15 different transport layers for the U.S. dollar. You have banks, credit cards, debit cards. You have Venmo, PayPal, Cash App, and many others ... But who needs a dollar?" said Ardo}

This broader utility of USDT may contribute to its status not only as the largest stablecoin, with a market cap of nearly $120 billion, but also as the third-largest cryptocurrency overall, behind only bitcoin (BTC) and ether (ETH). It is also more than three times the size of its closest stablecoin rival, Circle's USDC, which has a market cap of $35.6 billion.

noOfHolderstablecoinsgeopoliticsintersect: Treasury bills

The debt provides backing for the cryptocurrency, easily switchable into dollars if USDT holders want to cash out. And, in the meantime, the interest payments roll into Tether's coffers.

While the Beijing government, the second-largest holder of U.S. government debt, continues to trim China's holdings of U.S. Treasury bills, stablecoin issuers like Tether have had a voracious appetite for them, scooping up just over $100 billion worth as the People's Bank of China dumps them.

If Tether were a country, data shows, it would have holdings equivalent to Germany and would be closing in on South Korea.

"We added resiliency to the ownership of the U.S. dollar, so now you don't have one single country, one single decision maker that can sell hundreds of billions of T-bills at once," said Ardoino. "USDT and Tether are the best friends for the U.S. dollar."

Cantor has most of Tether's reserves

For most of its history the state of Tether's reserves has been a big question mark, and for good reason.

During its early days the company was repeatedly de-banked and was a bit of a vagabond, having to open and close accounts around the world from Qatar to China, Taiwan and Canada.

When USDT's backing was unclear, CoinDesk fought to have the full details of Tether's banking relationships released by the New York State Attorney General, which had obtained them during an investigation. (The stablecoin is banned in New York as part of a settlement). Initially, the NYAG opposed CoinDesk's Freedom of Information Law (FOIL) request for details about the reserves, but a judge dismissed their case.

Now, things have changed and the relationship is more simple: Most of the money is managed by financial services firm Cantor Fitzgerald with the bank's CEO, Howard Lutnick, regularly vouching for the stablecoin issuer.

Ardoino said that Lutnick would have a perfect line of sight into the reserves backing USDT, and Tether completes the same style of attestation by a large accounting firm as its competitors.

"Whoever believes in these conspiracy theories should get out from their mother's basement," he said, referring to speculation the company doesn't have sufficient backing for USDT.

The market doesn't seem to.

A Polymarket contract gives a 4% chance that Tether will declare insolvency in 2024, which is lower than the market's belief that a nuclear weapon will be used this year, which comes in at 9%.