Paolo Ardoino, CEO of the cryptocurrency company Tether, was flying over Switzerland last week as he contemplated the changing regulatory landscape.
Tether used to be at war with the establishment. Now it is the establishment.
The crypto giant – tether is the most traded cryptocurrency in the world – has had a strange trip. Four years ago, banks were dropping Tether as a client, and regulators in New York had the company against the wall over questions about commingled client and corporate funds. Treasury officials were complaining that dollar-backed cryptocurrencies enjoyed the international privileges of the dollar without the responsibilities of preventing its misuse. Federal investigators were looking into Tether for possible violations of anti-money-laundering and sanctions rules.
The cryptocurrency industry anecdotally – and conspiratorially – describes the Biden administration’s posture toward crypto as a systematic effort to debank crypto in the form of tactics such as “Operation Choke Point 2.0”. Ardoino says Tether’s leadership needed to become globetrotters in search of someone to take their business.
And it’s a lot of business. Tether currently is the 17th largest holder of US government debt, with nearly as much in treasury bonds in its digital vaults as Saudi Arabia. Tether’s value remains stable because it is pegged one-to-one to the dollar, meaning the value of each individual tether coin is $1. The company backs the total value of the cryptocurrency with dollar assets like treasury bonds in an American bank – in this case, $140bn deposited with Cantor Fitzgerald.
Tether comes just behind bitcoin and ethereum as the most valuable cryptocurrency, and by most measures it is the most widely traded. Investors in countries with unstable currencies, like Turkey or Argentina with their 40%-plus inflation rates, use it to hold on to the value of their savings against the dollar. Crypto traders use tether to park their digital assets in a safe place.
The degree of cooperation between Tether and law enforcement reflects an evolving shift in the government’s posture toward the company, even as federal agencies had been cracking down on cryptocurrency more broadly under Joe Biden.
“We’ve never been shady,” Ardoino said. “The company has been great. It has been attacked. Debanked. You know, when you’re trying to be a disruptor – in a good sense – you are going to always be attacked by the establishment.”
Previous administrations’ hostility to crypto – and perhaps to tether in particular – was the product of strategic mistakes the company had made, Ardoino said.
“We were very naive. We thought: ‘Oh, we are going to keep our head down.’ We were not communicating. We were not telling what’s going on, and that was used against us,” he said. “And that’s fair, right? So, if someone is not communicating, or you feel is not transparent enough, then that is how people get to fear.”
After settling its case with New York regulators in 2021, Tether began to come out of its shell, publishing quarterly statements and expanding its cooperation with the government. Today, things are different for Tether. Its banker – the Cantor Fitzgerald CEO Howard Lutnick – has been confirmed as secretary of commerce in the Trump administration. The company says it is proud of its cooperation with US law enforcement. Though Tether’s holding company is headquartered in crypto-friendly El Salvador, the cryptocurrency is expanding in a way that Ardoino says will help the United States secure its position as the world’s reserve currency.
“We have 400 million users in emerging markets,” Ardoino said. “We are basically selling the US debt outside the US … We are decentralizing the US debt as well, basically pushing for dollar hegemony. That’s how the US can maintain its dominance when it comes to its currency.”
It’s a line Lutnick might have written into his confirmation hearing speech himself. The Senate confirmed Lutnick on a party-line vote 51-45 in February. Ardoino said their relationship is at arm’s-length now, though.
“Cantor [Fitzgerald], they are our custodian. So, we will continue to have this relationship with Cantor,” he said. “They have been a great custodian for us. They are primary dealers, so we can have basically direct access to the Fed[eral Reserve] to purchase [government] debt. With Howard, when he goes into government, we cannot talk to him.”
Lutnick has been a vocal backer of cryptocurrency and tether’s position in the industry in particular. Senators had some sharp questions for him about tether at his 29 January hearing, with Senator Maria Cantwell pressing him about audited holdings.
“Do you think the market needs to comply with audits about whether one-to-one ratios really exist on stablecoins?” Cantwell asked Lutnick.
“I believe stablecoins, US dollar stablecoins, should be audited, should be completely backed by US treasuries 100%,” Lutnick replied.
“How do we prove that?” Cantwell then asked.
“A US audit and one-to-one backed by US treasuries,” Lutnick continued. “And lastly, you can’t change the rules; meaning if someone has bought the stablecoin, you can’t change the price. If someone’s made a deposit with you, you can’t say: ‘I’m going to withdraw, you’re going to change the price.’”
She also asked about reports that “as much as $19bn of Tether could be illicit activity by the North Koreans, the Russians, the Chinese. And so, what do we do about that? What is your solution?”
“It’s like blaming Apple because criminals use Apple phones,” Lutnick replied. “It’s just a product. We don’t pick on the US treasury because criminals use dollars. So, I think it’s just a product … They are signed up with all US federal law enforcement. They follow all federal law enforcement instantly.”
Ardoino rejects the suggestion of tether’s usefulness to criminals. “There is no financial institution – even the big banks, they don’t have this breadth of collaboration,” he said, citing more than 200 agencies in 50 countries that work with Tether.
A Swiss bank might rebuff an American law enforcement agency coming for money in its accounts. Tether, however, touts its ability to return money stolen from others. For example, a notable “pig butchering” scam last year sent Shan Hanes, CEO of Heartland Tri-State Bank in Elkhart, Kansas, to a 293-month federal prison term for embezzling $47.1m and sending it overseas as cryptocurrency. Tether was able to recover $8.3m for the victims.
The traditional banking system is more porous than a cryptocurrency wallet right now, Ardoino argued.
“When [criminals are] finally trying to use blockchain and move money on the blockchain in USDT [tether’s trading symbol], we see them and we freeze them,” he said. “And it takes 15 minutes to freeze an address from our stock. We are much more granular and faster than any bank or any other financial institution. So, I’ve been saying very loudly and publicly that any criminal using USDT is a very stupid criminal, because we can see everything and we can catch it.”
Ardoino does see a threat in an adversarial regulatory relationship toward crypto, both in the United States and Europe. Both Coinbase, the largest cryptocurrency exchange in the US, and EU-based exchanges removed USDT because it does not comply with the EU’s Markets in Crypto-Assets regulation, which went into effect at the end of 2024. Traders can hold Tether in non-custodial wallets but can’t trade it on an exchange that complies with European regulations.
“I think that the US understands very well that they should very, very much avoid a DeepSeek moment for finance and crypto,” Ardoino said, suggesting that it is possible that some invention in a stealth-mode lab somewhere beyond the industry’s attention could radically change the competitive environment. Ardoino was referring to the Hangzhou-based startup DeepSeek, a large language model AI that emerged seemingly from nowhere in January that could compete with Meta and OpenAI’s offerings at a fraction of the cost. Its emergence is disrupting AI business plans by changing the competitive environment.
Ardoino hopes the new administration will have settled on its approach to regulations – likely to be much friendlier than its predecessor’s – by September, he said. “I think that they want to get regulations done by June. June would be very aggressive as a timeline, but September is realistic.”
