Crypto exchange Bitfinex and sister firm Tether settled an inquiry this February with the New York State Attorney General for US$18.5 million, closing a 22-month investigation into whether Bitfinex sought to cover up a US$850 loss in funds. As part of the settlement — which Bitfinex and Tether admitted no wrongdoing — Bitfinex and Tether agreed to provide quarterly reports disclosing Tether’s reserves for two years.
Still the world’s largest stablecoin, Tether has exploded in growth since its legal settlement. Despite Tether now being banned in the state of New York, its USDT stablecoin has almost doubled in market cap, from US$34 billion on February 23 to US$62 billion as of publishing time, after being listed on Coinbase Pro and expanding into new blockchains including Avalanche. As for Bitfinex, it stopped doing business in the U.S. in 2017, citing the “challenging” regulatory landscape there.
“From a business perspective for us, the world is big enough for everyone. We are thriving in markets like Asia and Europe and so on. We don’t have — in this moment — the interests in reentering the U.S. market,” said Bitfinex CTO Paolo Ardoino, in an interview with Forkast.News. “We are growing impressively without that.”
“The U.S. in general is overcrowded both from the exchange side — you have Gemini, Coinbase, Kraken, Bitstamp and Bittrex and so on,” Ardoino said. “It is becoming a little bit crowded for the stablecoin side as well.”
Controversy over Tether continues as well.
Last month, Tether published its first court-mandated report on its reserves, and the details are causing a stir.
Prior to 2019, Tether maintained that its USDT stablecoin was backed 1:1 by the U.S. dollar, but the company retreated from those claims in April that year in an affidavit to a New York court, clarifying that its reserves were only 74% backed by cash.
Tether has now revealed a more detailed breakdown of its reserves, clarifying that 76% of its reserves were “cash and cash equivalents.” About 65% of the “cash and cash equivalents” consisted of commercial paper — or short-term unsecured loans. Less than 4% of the 76% is cash. About 22.5% of Tether’s total reserves consists of secured loans, corporate bonds, funds and precious metals. Less than 2% is “other investments” such as cryptocurrency.
Ardoino pushed back on these criticisms of Tether, asserting that the stablecoin is “100% backed” and that the company is working hard to provide greater transparency with investors and regulators.
“People cannot really comment on that without having the perfect exact breakdown of all the different investments that have been made,” Ardoino said. “So, without knowing the average cost price of the precious metals reserves, or without having the breakdown of the commercial papers and so on, is really — first of all — is unfair.”
“Asking for more transparency is good,” Ardoino said. “Of course, people want more and more. But it’s not that we are doing nothing. People should give us time to see if we are still committed and what we can do to improve that level of transparency…. Attacking now, saying that, we could have done more — yes, but look at where we were six months ago.”
In an e-mail to Forkast.News after the interview, Bitfinex stated that Ardoino did not “make any new disclosures that were not already a matter of public record.”
“We continue to make strides in providing additional information to the community,” said Joe Morgan, a spokesman for Bitfinex in the email. “Stay tuned for more steps from us.”
Watch Paolo Ardoino’s full interview with Forkast.News to learn more about Tether’s origins, what Ardoino thinks is the secret to Tether’s success, his thoughts on the recent crypto market crash, and how stablecoins could interact with decentralized finance (DeFi).
- On Tether’s transparency: “Asking for more transparency is good. We have shown we settled, we did an attestation, we published the reserve breakdown. Of course, people want more and more. But it’s not that we are doing nothing. People should give us time to see if we are still committed and what we can do to improve that level of transparency.”
- Responding to Tether’s critics: “Attacking now, saying that, we could have done more — yes, but look at where we were six months ago. Look at what we did. People were saying, ‘you are going to be dead, you are going to jail, you are going bankrupt,’ and so on. ‘You are not backed.’ Yet we got regulators looking at our numbers. We got an attestation. We published the breakdown. So it is not nothing. It’s a lot. It’s more than anyone else. And we will continue to do that.”
- On why Tether should be trusted: “In 2014, Tether was created. No one knew what a stablecoin was. And today we have central banks talking about stablecoins. We have many competitors and all came from an idea of people that get trashed now. And that’s so bad. The misunderstanding is huge and what I’m doing in the time I’ve known code, my team is trying to pass this message. We are good people, good people. We have families. We work really hard. We basically don’t sleep. We do everything that we can to support Bitcoin.”
- Is Tether audited? “It’s likely that we will be able to get an audit by next year. The auditors take a long time also because we don’t want to audit only one year, but also going back in time a little bit. That’s really what we are trying to do now.”
- Why Bitfinex won’t be doing business in the U.S. anytime soon: “We are thriving in markets like Asia and and Europe and and so on. We don’t have — in this moment — the interests in reentering the U.S. market. We are growing impressively without that. For us, it is not a problem of pride or whatever. It is just that if we can grow in the places that we are more familiar in, it’s easier, it is faster, and competition is always welcome. The U.S. in general is overcrowded both from the exchange side. You have Gemini, Coinbase, Kraken, Bitstamp and Bittrex and so on. It’s becoming a little bit crowded for the stablecoin side as well.”
Angie Lau: In times of turmoil switch to stablecoins, they say. How important are stablecoins to the overall crypto market? Is Tether a placeholder for a U.S. digital dollar? And how much transparency are we seeing from Tether today?
Welcome to Word on the Block, the series that takes a deeper dove into blockchain and the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast.News. I’m Forkast Editor-in-Chief Angie Lau.
Well, it’s been about three months since crypto exchange Bitfinex and its sister firm Tether settled with the New York attorney general for US$18.5 million. Since then, the world’s largest stablecoin Tether’s USDT has exploded in growth. Almost doubling in market cap and expanding to various blockchains, including the recently announced Avalanche.
Bitfinex and Tether have taken some steps to provide transparency since the New York case closed, including a recently released report of its reserves. Now, some say Tether is the most important factor that could sway market sentiment. Tether reveals for the first time the reserve it has since settling with the New York attorney general revealing what Tether is really backed by and it’s not only the dollar.
Bitfinex CTO , Paolo Ardoino, joins Forkast right now for his first on camera interview since the release.
Paolo, Welcome to the show. It’s great to have you on.
Paolo Ardoino: Thank you very much, Angie, for having me today.
Lau: It’s really an opportunity to answer very candidly. We’re going to give you the opportunity to do that. It’s going to be a very candid and transparent conversation. So we appreciate it. And let’s get things on the record.
Starting from when Bitfinex was born here in Asia, as we’ve monitored and paid close attention to Bitfinex, very much part of the community, born in Hong Kong in 2012 and then registered offshore [in] British Virgin Islands. But where is Bitfinex all based now?
Ardoino: So we decided to bring Bitfinex to be a decentralized company. Bitcoin is the reason why we are all here, right? This is what really started this industry. We believe that going full decentralized as a company is a way to be true to Bitcoin itself.
Bitfinex started in 2012 with two or three people. So it was a really, really tiny exchange and it grew quite a lot, especially in the last few years, but we thought that maintaining this level of decentralization, basically not having offices, would allow us to promote diversity in the company, to promote cultural inclusion and also allow us to grow better. And, of course, since we are a global business to cover better the 24 hours.
When we took this decision, it was many years ago. In a world where the pandemic makes lockdowns unpredictable. Now, it turned out to be the right choice. We see many other companies that are following our steps now. I can say that although a few of our guys and girls that work with us have been affected personally, the overall ability of the company to handle the situation was quite good given our history of being fully decentralized.
Lau: Decentralized is one thing for a decentralized workforce — and you’re absolutely right — we are all that these days. But when you are a market cap exchange of US$60 billion, for those wondering where jurisdictionally Bitfinex lies and on a regulatory kind of a framework, why…