Paolo Ardoinothe new CEO of crypto company Tether, is grappling with a difficult but enviable problem: how best to spend billions of dollars. Recently flush with cash, Tether is venturing into uncharted new areas such as AI. Ardoino’s ambitious plan is to challenge Microsoft, Google and Amazon.
Tether, which is registered in the British Virgin Islands, is among the largest crypto businesses in the world. Most of its revenue comes from its stablecoin, USDT, which is pegged to a dollar valuation of a basket of currencies and other assets held in reserve.
The model is relatively simple: Tether receives US dollars in exchange for tokens that customers can use to trade freely in the crypto market. It holds some of those dollars in cash, trades most for interest-bearing securities, and borrows some. If a client ever wants to exchange a USDT token for the dollar it represents, Tether withdraws from the pot, but in the meantime generates income from the assets it owns.
Tether’s reserve consists largely of short-term US government bonds, whose earnings are tied to the prevailing interest rate, meaning the company has become increasingly profitable as central banks have raised interest rates in response to inflation. Tether recently reported $5.2 billion in revenue for the first half of 2024. from a reserve of $118.5 billion.
Under Arduino, who took over as CEO in December after serving six years as CTO, Tether is looking for something to do with all those backlogs. Some of the money went to build a buffer for the USDT reserve, Ardoino says, but the rest is being put into the company’s new venture investment arm, Tether Evo. The company has already taken a majority stake in neural implant technology startup Blackrock Neurotech and invested in data center operator Northern Data Group, whose infrastructure is used to train AI models.
Tether has courted its fair share of controversy. In 2021 the company reached a $41 million settlement with US regulators who had accused it of making misleading statements about the composition of its reserve. In 2023 Tether allegedly used fraudulent means to obtain banking services early in its history. In addition, the UN and blockchain analysis firms have argued that USDT has become the preferred instrument for money laundering, terrorist financing and other illegal activity, although Tether disputes the characterization.
