Tether might build a U.S. payment network for stablecoins
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Tether, the controversial issuer of the world's largest stablecoin, has a vision for a blockchain-powered payment network in the U.S. — and the financial heft to see it through, CEO Paolo Ardoino tells Axios in an interview.
Why it matters: With legislation on the horizon, a major IPO in the works from rival Circle and an ever-growing list of new competitors positioning for a piece of the market, the industry's giant looks unlikely to sit out the coming race for stablecoin supremacy in the United States.
The big picture: Other issuers, Ardoino expects, will chase U.S. institutional customers who use stablecoins for things like crypto trading and decentralized finance, or DeFi.
- But Ardoino sees a better opportunity in the U.S. consumer market.
- Tether is likely to set up a new company in the U.S. and create a new payment token specifically for the country, he says.
- Its existing token, USDT, the largest stablecoin in the world, will continue to serve the international market and the developing world.
What they're saying: "Here's the big difference: In the U.S., people would use a stablecoin as their checking account, while, outside the U.S., people use USDT as their savings," Ardoino said.
Friction point: Stablecoins might really be a cheaper way to do payments, but the problem is most people don't have stablecoins. They have dollars inside banks.
- To make stablecoins work as day-to-day payments, Tether would have to solve that problem: getting people to hold stablecoins in digital wallets, ready to use for purchases.
- And then merchants, the places where people would make those purchases, would also need to be able to accept them.
The intrigue: Ardoino was reluctant to cite any specific plans for places where people in the U.S. could spend its new stablecoin, other than its acquisition of censorship-free YouTube competitor, Rumble.
- But when asked by Axios point blank whether Tether would consider building a point-of-sale merchant services offering, similar to Square but including stablecoins, Ardoino said:
- "I cannot spoil all our strategy, but you are on the right track."
State of play: Ardoino's comments come while plenty of attention has been flowing to its biggest rival, Circle, as it prepared for a U.S. IPO.
- With capital drying up for investment, fintech IPOs have been getting canceled, but so far Circle appears to be staying the course.
- But Ardoino downplayed any competitive risk to Tether coming from a publicly listed Circle flush with new cash.
- Circle's targeting a $5 billion valuation while, in our conversation Ardoino said, "We have $20 billion in profit that we did not distribute to the shareholders. So I'm pretty sure that we can move at the speed of light."
Brady's thought bubble: Everyone's going to focus on the talk from big banks and their own planned stablecoin launches, but big companies tend to be slow and bad at disrupting their own business models.
- If stablecoins really do catch on here, bet on a challenger leading. Maybe Tether. Maybe Circle. Maybe an upstart out of Nebraska.
What we're watching: The interminable question with Tether has always been the fact that it hasn't had a full audit of its reserve assets, but after surviving two crypto downturns it's mainly only outsiders who fret about the issue at this point.
- Ardoino told Bloomberg's Odd Lots that he's in talks with major audit firms now that the climate has changed.
- Regardless, Tether will probably set up a whole new U.S.-based company with separate reserves for the new token anyway.
- Meanwhile, the company itself has no plans to leave El Salvador, however.
What's next: Tether will wait until U.S. stablecoin legislation has been enacted into law, so that it has more clarity in the U.S. regulatory structure.
- Other major financial players are likely to jump in then too. The race to dominate the U.S. stablecoin market is sure to have a crowded field.
