With $111 billion in assets and $6 billion in profits, shadowy stablecoin merchant Tether has emerged as the most profitable company in cryptocurrencies. The company is currently undergoing restructuring and has entered Bitcoin mining, AI, and education.
by Nina BambishevaForbes staff
WWhile much of the crypto world crashed and burned during the recent market downturn, reeling from the collapse of FTX and other giants, Tether thrived.
The market capitalization of its stablecoin, USDT, has ballooned to $111 billion, three times that of its closest rival, USDC, issued by Boston-based Circle. Tether is in an enviable position as its source of capital is virtually free, thanks to rising interest rates on U.S. Treasuries, which make up a large portion of the reserves backing the digital stablecoin. Unlike traditional banks, customers who deposit hard currency with Tether in exchange for tokens will not earn interest.
In the first quarter of 2024 alone, Tether reported unaudited company-wide “financial results” of $4.5 billion and net assets of $11.4 billion. Reporting net income of $6.2 billion in 2023, it is likely to be the most profitable company in the crypto industry today. Coinbase, the largest U.S. cryptocurrency exchange, earned $95 million on revenue of $3.1 billion for the full year of 2023, with net income of $1.2 billion in the first quarter of 2024, mainly due to higher crypto prices. It became. Approximately 20% of Coinbase's 2023 profits were generated from interest received from reserves backing the stablecoin USDC, thanks to its partnership with Circle.
Capital-rich Tether is now looking beyond stablecoins for growth. Last month, the British Virgin Islands-based company announced a strategic reorganization that saw it split into three new divisions: stablecoins, Bitcoin mining, artificial intelligence, and non-education.
“Cryptocurrency has this concept of cutting out intermediaries, which can be applied to many other things,” said Tether's new CEO Paolo Ardoino, who has served as chief technology officer and spokesperson since 2017. ” he says.
Tether's planned expansion is more than just a matter of smart diversification, it's a philosophical one. “I feel like 90% or more of technology is built with the best-case scenario in mind, but the people who are building it with the worst-case scenario in mind,” said Ardoino, 40. There's no one there,” he says. We are saying that there must be a major war, but anything can happen and we are not prepared for it. ”
Cryptocurrency historians will recall that Bitcoin was created by Satoshi Nakamoto in response to the 2008 financial crisis. At the time, doubts about the stability and reliability of the existing global financial system were widespread. Ardoino believes Tether will play a big role in creating what he describes as sovereign technology that can empower people.
Ardoino says: “It's good to have resilient money, but if you only have resilient money and everything else is concentrated, it can quickly get destroyed. Our One of our mottos is 'Building for the Apocalypse.'
Paolo Ardoino grew up on a family farm in northern Italy. He started coding at the age of eight and studied computer science and mathematics at the University of Genoa. After graduating in 2008, Ardoino became a researcher on military projects at electronics and information technology company Selex Communications, focusing on high-availability resilient networks and encryption.
Seeking opportunities outside Italy, he moved to London around 2013 and soon after founded Fincluster, a startup building cloud-based financial applications for advisors, fund managers and institutions in London, Milan and Lugano. did. In October 2014, one of his clients introduced him to Giancarlo Devasini, his CFO of Tether and its sister cryptocurrency exchange Bitfinex. Devansini asked Ardoino to help him expand the Bitfinex platform, which was already gaining popularity.
Mr. Ardoino quickly assumed leading technology responsibilities at both companies, making him the public face of Tether after Mr. Devasini and CEO Jean-Louis van der Velde shunned the spotlight. . According to , the three and their general counsel Stuart Hegner would later become billionaires. forbes magazine Billionaire ranking.
In December, Ardoino officially took over the reins of Tether while retaining his CTO role at Bitfinex. He is also leading the strategy for Tether, Bitfinex, and Holepunch, his platform with infrastructure technology launched by his platform Hypercore that allows developers to create apps without a server.
TArdoino said Ether's ownership structure remains unchanged. CFO Devasini remains the company's largest shareholder, and former CEO Van der Velde is also involved as an advisor. But that didn't stop Ardoino from charting a new path for Tether. Last month, the company announced a reorganization into four divisions to reflect its expanded focus.
- The Treasury Department will manage USDT and oversee the upcoming digital asset tokenization platform.
- data. Responsible for strategic investments in emerging technologies such as AI and peer-to-peer platforms.
- Power focuses on Bitcoin mining and energy-related ventures.
- Edu, supporting education and leadership initiatives.
Tether has already made great strides in each area. Last year, the stablecoin giant participated in a $1 billion investment in a Bitcoin mining operation in El Salvador called “Volcanic Energy,” which was to be powered by solar and wind energy. He also established his own Bitcoin mine in Uruguay. Last September, Tether purchased 10,000 Nvidia H100 graphics machines, typically used by artificial intelligence companies looking to process vast amounts of data, on behalf of German-listed Bitcoin miner Northern Data. -Revealed that it spent $420 million on processing units (GPUs). In exchange for the advanced chips, Tether will acquire a 20% stake in the company and loan the chips to AI startups. Another innovative investment by Tether came in April, when it spent $200 million for a majority stake in BlackRock Neurotech. BlackRock Neurotech is a Salt Lake City biotech that manufactures brain implants designed to help people with neurological disorders and paralysis “eat, drink, and be active.” With a robotic arm, you can send emails just by thinking. ”
Over the past year, the company has doubled the number of Lean employees to about 100 people, said Ardoino, who interviews each candidate individually. “We don’t need a yes man,” Ardoino says. “We want people to tell us what they think about Tether and whether what we're doing is right or wrong.”
When it comes to Bitcoin mining, Ardoino's goal is a 5% market share, which would rank it among the top miners in the world. “If you think of Bitcoin as the ultimate form of money created for the apocalypse, you would not want the majority of Bitcoin mining to be concentrated in one country. It’s about investing,” he explains. “We started in South America, but we plan to expand to different regions around the world to ensure Bitcoin mining continues to be decentralized.”
“In terms of competing in Bitcoin mining, it's really about how much you can invest. They've allocated about $500 million, which will get you pretty far,” HC Wayne Wright analyst Kevin Dede said. Adam Sullivan, CEO of listed miner Core Scientific, added: It's a natural fit for them because that's what actually drives their business. '' Sullivan is referring to the fact that Bitcoin's recent price surge is boosting profits for Tether, which holds large amounts of the digital asset. If the price of Bitcoin continues to rise, profits from mining Bitcoin should increase.
However, while Tether has made progress in Bitcoin mining, the transition to AI will be more difficult. In addition to deals like Northern Data, Tether is looking to build in-house expertise in building large-scale models and integrating AI capabilities into existing products. Job information on the company's website includes positions such as AI engineer and AI R&D manager. “I think we can use AI a lot more and we can make it a little bit less impactful of the political bias of a small elite that is currently running the biggest AI projects in the world,” Ardoino said of a small group of companies including Microsoft. Mentioned. OpenAI and Google are currently driving most of the AI development. “We believe that just like money, AI should be disintermediated.”
Rob Toews, a partner at Radical Ventures, has doubts about Tether's so-called foray into AI. “Obtaining GPUs and leasing them to AI companies is an easy strategy to work with, but I can't imagine Tether being a credible competitor in the world of multimodal AI model building.” .”
Through its education division, Tether will offer courses and masterclass programs that include blockchain technology as well as artificial intelligence, coding and design. The company has already started working with Georgia's Digital Industry Academy and Thailand's largest local exchange Bitkubu. “Education is the foundation of this journey and serves as the linchpin for promoting economic prosperity and sustainable development,” says Ardoino.
GGiven Iven crypto's troubled history and the fact that Tether has yet to produce financial statements that have been audited by a CPA, it is natural to be concerned about the source of funding for the company's new investments. Much of the $4.52 billion profit in the first quarter was due to increases in the company's Bitcoin and gold positions, according to the company's financial filings. Ardoino argues that Tether's investments come from profits, not customer reserves.
“If you think that people are starting to tap into their savings to invest in things like that, Tether could become a real possibility pretty quickly,” said Austin Campbell, an adjunct professor at Columbia Business School and a consultant to blockchain companies. It could collapse.” “I've always said that the issue with Tether is not a problem they have right now. They're not restricted, so they might keep it in the future.”
Campbell also cautioned that the superiority of Tether’s stablecoin is far from guaranteed in the long term. “As stablecoin regimes emerge, regulations formalize, and these structures are put in place, Tether will either need to start complying with those regimes locally or move away from those jurisdictions.” ”
Tether's dominance is already being challenged. According to DefiLlama data, USDT remains the leader in the stablecoin market with a 69% share, but lags in trading volume. According to analysis by payments giant Visa and enterprise blockchain data platform Allium Institute, Circle's USDC recorded 178.6 million transactions in April 2024, surpassing USDT's 173.9 million monthly transactions. Ta.
Additionally, Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (N.Y.) introduced a new version of their bipartisan stablecoin bill in April that would allow institutions without banking licenses to The issuance of table coins will be limited to a maximum of $10. According to a recent report from S&P Global Ratings, competition from traditional banks could increase.
Ardoino said: “We believe all of these investments are important to Tether. These are things we believe have the potential to change lives in emerging markets and developing countries.” I want to be a leader in the evolution of ”
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