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In late January, Todd Gillespie was at a hotel in Al Salvador listening to a man in a T shirt and track pants talk about the global financial system and the end of the world as we know it.
New regulations plus you know, wars, plus economy instability, monetary debasement, AI and all that. These are all variables.
If you look at all of them, you can predict the trajectory of society.
Now, I was in this big ballroom and this hotel in San Salvador, darkened lights and chandeliers, and this man is standing on this stage in front of you know, a thousand odd people really and presenting this PowerPoint slides with you know, pictures of dark storm clouds.
Society cannot be stable if really for the population of work, billions and billions of people don't have access to what maybe many of us in this room are used to.
But you know, basically talking about the shackles of the current financial system and the political decline and geopolitical dangers that the world is seeing, and basically how his company is going to thrive through that.
Todd is a reporter on the Finance team at Bloomberg. He normally covers large investment banks, including Goldman Sachs. But guy on stage that was Paolo Arduino, the CEO of Tether, a cryptocurrency linked to the value of the US dollar. Arduino told the crowd in that ballroom that he's building Tether not just to survive armageddon, but to thrive in.
Armageddon when many other companies will fail, when countries might fail, when we might see migration crises. Seed, yeah, exactly. He sees Tether as this sort of life raft.
In just over a decade, Tether has grown from an idea into a global crypto juggernaut. It has faced some major hurdles along the way, but under President Trump's crypto friendly administration and with investors looking for alternatives to traditional financial systems, Tether could now be seeing some of its fastest growth yet.
That is one of the most increasingly powerful companies in the world that you've already never heard of.
I'm Stacey Bennox Smith in for Sarah Holder and David Gurra, and this is the big take from Bloomberg News today on the show. Tether one of the world's most powerful and most secretive companies. We unpack how its business model of issuing dollar linked stable coin is turning it into a deal's machine, and whether scrutiny over its political connections could complicate its meteoric rise. I am a little bit embarrassed to say I had not heard of Tether, but
it is a huge company. Will you describe Tether a little bit? What is it and what does it do?
Yeah? Of course, daisy. And you're not alone in thinking you know and not really knowing what you feel better.
Essentially, Teather offers a kind of cryptocurrency, a stable coin.
Its main product is this thing called USDT, which is a token that essentially mirrors the value of the US dollar.
It's pegged.
It's pegged. Yeah, exactly, it's tethered, right, That's the whole point y.
That is smart, Todd says. The Tether origin story goes something like.
This, About like fifteen nine years ago, some very smart people had this idea of having this token that was pegged to the US dollar, but operate it outside of the traditional financial system. You know, this comes from the same portion of the sort of crypto world that is somewhat libertarian, it's somewhat anti the controlled that central banks have over the.
Monetary system fiat currency.
Anti fiat currency, anti you know, inflation, essentially the ability of the federal government and central banks to devalue a currency and essentially devalue what a lot of normal people and common people, you know, get affected by. And they're basically saying, you should have some kind of fixed money supply that is outside of the traditional financial system that allows the free flow of money and takes some power out of the hands of central banks.
By tethering the value of us DT to the US dollar, the idea is that the value of their stable coin will remain stable. One USDT is supposed to always equal one dollar. Its value doesn't rise and fall like bitcoin and other cryptocurrencies. And because it's on the blockchain, you can send Tether to anyone else with a crypto wallet
instantly online without having to involve a bank. Todd says both those qualities, the stability and the transferability, make it really appealing for people in emerging markets.
When you buy a tether coin or you essentially go to Tether's website and you buy a TETHERID, you give it a USDT, you give it a dollar, you give the company a dollar plus a small fee, you get a tether in return, which enables you to send things and enables you to remit payments. For instance, one of the main use cases that tether has is for people, for instance, who might live in the US who want to send money home to their family and don't want a Western Union or a traditional bank to take a
huge cut of that. Tether allows you to do that with minimal fees essentially, so it basically is a much more efficient way of doing that of processing payments, and fundamentally that's what it says makes it so popular.
But those same reasons, the stable value, the ability to store it and send it without involving banks, have also made USDT a popular way for people to conduct illicit transactions, and that is something tether says it has tried to clamp down on.
Tether says that partly because it's on a blockchain, it
allows you to trace these transactions. So once you can identif to fin whose wallets are so on the other side, who these users are, who the sender is, who the receiver is, allows you to freeze that actually better than you at for instance, with cash, right like it's better to at least have something on a blockchain where you can isolate it, you can trace it, you can trace it versus like having, you know, some drug cartel go over borders with bags and bags of cash.
In a statement, Tether said it quote takes fraud, consumer harm, and the misuse of USDT extremely seriously and maintains a zero tolerance policy toward illicit activity end quote. The company added it works with law enforcement agencies worldwide and has frozen about four billion dollars worth of USDT tokens at the behest of authorities. But a central question around Tether is its reserves. For every dollar's worth of USDT, the company needs to hold a dollar in some kind of stable,
relatively liquid asset to back it up. If not, the whole currency could collapse. But it is really hard for anyone outside the company to know exactly how much money Tether holds or how that money's invested.
Heather has never had a proper audit, which has led to a lot of skepticism over the strength of its reserves.
Tether has announced it's aiming to undergo a full audit by the end of twenty twenty six, but for many years that uncertainty gave US Regulator's pause. In February of twenty twenty one, the New York Attorney General's Office found the Tether misrepresented its reserve holdings and banned the company
from doing business in New York. Later that year, the Commodity Futures Trading Commission found the between twenty sixteen and twenty eighteen, Tether only had enough FIAT reserves to back up its us DT tokens about a quarter of the time and find the company forty one million dollars. But when the second Trump administration began, the political wins shifted for Tether.
In the Trump administration, you have a Colma secretary, Howard Lutnik, who was formerly the CEO of Counterfitzgerald, which is Tether's longtime banker. You have him in the cabinet.
His family owned some of the company from one.
Indeed, yeah, so essentially through the company, Howard Lutnik's children own a conversible bond that represents about a possible five percent stake in Tether, which at a valuation of five hundred billion dollars potential valuation of that large, that's obviously a lot of money.
That's a private island money.
It's private Island money.
Last October, Commerce Secretary Lutnik sold his multi billion dollar ownership interest in Canter Fitzgerald, the financial services company he led for more than three decades, to trust benefiting his four children. At about the same time, one of those trusts took the unusual step of borrowing an undisclosed sum from Tether. A spokesman for Counter Fitzgerald and the Lutnik children declined to discuss the size of the loan or whether it was used to finance any part of the
asset sale. And in recip advance to questions about LATINX divestiture and Tether's loan, a White House spokesperson said, quote, the only special interest guiding the Trump Administration's decision making is the best interest of the American people. During the same period of time, US lawmakers also fast tracked legislation to encourage the adoption of stable coins.
We've seen the Genius Act being passed through Congress, which
essentially creates a regulatory framework for stable coins. So not just Tether, but also Circle, which is its biggest rival but is a smaller company, are basically now given guardrails to issue tokens that are compliant with US government regulations which put them under greater obligations in terms of compliance and also mandate them to back their currencies, back their tokens with reserves of US treasuries, which the government wants
because essentially, the more biased you have for US treasuries, it allows you to lower the cost of your debt. Right, increase in demand helps you lower the price for the government. Right, so increases the.
Cost is like how the government gets a lot of its money. These are little loans exactly.
So on a purely commercial level, for Scott Besant or the US Treasury, you know it's a great deal.
In late twenty twenty five, Teather CEO posted on x that his company held about one hundred and thirty five billion dollars worth of US treasuries, which he said made it the seventeenth largest holder of US debt in the world and the only entity in the top twenty that was not a country. Treasury Secretary Scott Bessont has lauded the stable coin industry. Purchasing all of that debt, a movie says, will lower US borrowing costs and cement the dollar status as the world's reserve currency.
They didn't really care all that much about you know, what Teather might be doing with its profits that it gets from interests on its results.
It's counting on that demand, I mean, one hundred billion dollars worth of treasuries. If that demand goes away, that's a big deal for our entire economy potentially.
Yeah, that's a concern that has been raised meetings, you know, among finance chiefs of major economies. We've reported that. You know, last year at the IMF, there were discussions about the potential for stable coins to become a much larger part
of buying government debt around the world. And that's that is a potentially, if not worrying thing, it's a thing that people have to think carefully about, right because if there's a run on a stable coin, if these companies aren't set up properly, if there are compliance failures, or you know, if you simply can't trust the folks who are running them, that leaves your whole economy open to potentially a lot of a lot of danger on a financial level.
So what's the company doing with all that money, and how is it positioning itself to move into the US market. That's next. Tether has tradition only invested most of its one hundred and ninety three billion dollars worth of assets in US treasuries. That model has led to a lot of profit. Last year, with only three hundred people on staff, Tether reported a profit of ten billion dollars, and now Bloomberg's Todd Gillespie says Tether is looking to grow even bigger.
It is now trying to raise money at a five hundred billion plus dollar valuation, which would cement it really for the first time as one of the most valuable private companies in the world. When it started its fundraising process that we broke the story of late last year that was about on par with what SpaceX was raising money at. So it gives you an idea of the kind of ballparks that we're talking about SpaceX, Open AI Tether.
With so much capital, Tether is poised to become a big player wherever it chooses to invest its reserves. And it's not just us dead.
They have been buying land in South America. They've been supporting commodity trading companies. They've been buying up gold huge, huge quantities.
By the way, last year, Tether bought seventy tons of gold that is more than the reported purchases of almost any central bank. It's interesting that a crypto company is investing so heavily in gold and US treasuries. I mean, those are sort of the two traditional safe havens from volatility, and crypto is not a place to go to avoid volatility generally.
And it's interesting to think about how they're hedging that. I mean, it seems like a huge hedge because they are they are they are investing heavily and very very safe assets, but they also see bitcoin as increasingly a safe asset. Their argument is that, you know, as you see other stores of value become less and less predictable, the demand for bitcoin will go up, you know, as a safe haven asset as well. So from their mind,
that's what they're doing. They are future proofing the company, but also showing a way to have a future proofed economy.
Buying gold and US treasuries is one thing. Governments, companies, and individuals all over the world can do that. But Tether is also looking to expand its operations to America. Before the passage of the Genius Act in July of twenty twenty five, stable coins were in a sort of legal limbo in the US, which limited their popularity and growth in this country. But back in August, Tether announced a new hire to help change that.
One of the key people involved in this is a guy called bo Hines, who, by the way, is just thirty years old, but he was one of the key crypto advisors in the Trump administration and left recently and is now CEO of Tether's US operations.
And in January, just a few months after Hinz joined Tether, the company launched a new stable coin, the us AT.
So the main Tether token is USDT, but US eighty is essentially a token that is complying with the Genius Act, complying with US government regularly. This is it's a.
Special coin Teather's issuing just for the US market.
Right They're essentially interchangeable, but this one complies specifically with the restrictions of the US government's new regulations.
Like USDT, the USAT token is pegged to the US dollar. What makes us AT different is that US regulations restrict where Tether can keep the reserves. USAT is exclusively backed by assets like US treasuries. Tether also cannot place USAT reserves into precious metals like gold or into Bitcoin, and the company's pitch for US consumers is different too. Since people in the US already have access to dollars, having a dollar linked stable coin doesn't really have the same appeal.
It's not the same safe haven from inflation as it is in other parts of the world. In the US, todd says the company is looking to push Tether as a better way to process payments.
What they're enabling people to do here, for instance, what they think will be an appealing characteristic for company and individuals here is that you can avoid things like credit card fees. If you're a restaurant, I could pay for.
My dinner at a restaurant with yeah US.
At Yeah, you can avoid a three percent credit card fee, for instance, they might give you a discount in the same way that if you pay in cash, Oh, they might do yeah. And also the transaction would be settled immediately because it's done on the blockchain, which is essentially instantaneous.
To bolster that effort, Tether has invested in a wide network of online companies that cater to US consumers. Tad says the strategy, in part is to use those platforms to help push Americans into using USAT.
So Tether has invested in Rumble, for instance, which is a sort of right wing free speech video platform arrival to YouTube, where they already have a big base of you know, millions of users who use that all the time. A lot of the events at the conference in San
salvad Or were streamed on to Rumble. So they're looking to grow, and Paolo in our interview told me that they are looking increasingly four digital platforms in the US to invest into and that allows them to increase their use case, increase their relevance essentially to the US economy.
Tether has also used its fortunes to make inroads into Washington. An entity that identified itself as Tether America signed on as a donor to Trump's White House Ballroom project. The New York Times has reported that Tether is also expected to back a new political spending group ahead of the midrum elections this year, which it could do through its
new US arm. So, after having done a deep dive into this company and followed this company and it's sort of recent inroads into the US economy and political system, what is your takeaway here? Is there a sort of a systemic danger that Tether poses or how do you feel after having reported out all of this.
I think I'll answer your question with two points. I think the first one is that we've seen stable coin adoption actually plateau a bit recently in the past year or two.
Yeah, crypto has not had a good right couple of months.
Crypto as a whole Yeah, the crypto as an industry certainly has hasn't had a whole great couple of months, and that will obviously like hit faith in the sector and hit faith in stable coins as a proxy as
well to some degree. There's no doubt about that. My takeaway is, I, you know, I don't think that Heather's going to become the most mainstream currency in the US or payment token in the US anytime super soon, But there is a growing use case that I think they will work out somehow a way to expand in the US and increase adoption some ways, whether that's through digital platforms or elsewhere. But the other thing that really interests me is really what they're going to do with their profits.
And they've invested, as we've said when Rumble, but they've also invested in dozens of other companies. I mean, their investment portfolio across the world is about one hundred and thirty different companies that they've invested their profits in, and what are they really going to do with all that money is a huge question.
This is the Big Take from Bloomberg News. I'm Stacey Mannix Smith in for Sarah Holder and David Gurra. To get more from The Big Take and unlimited access to all of Bloomberg dot com, subscribe to date at Bloomberg dot com slash podcast offer. If you liked this episode, make sure to follow and review The Big Take wherever you listen to podcasts. It helps people find the show and thank you for listening. We'll be back tomorrow.