WIRED: This year, Tether has chosen to diversify its business model by investing in venture capital. Tell me why.
Ardoino: Over the past two years, Tether has become extremely profitable thanks to rising interest rates. When Tether started, you could earn 0.2 percent on the reserve, but today you can earn 5.5 percent. Of course, that may be limited in time (we are hearing about possible rate cuts), but it is very difficult, even with 3 or 4 percent inflation, to go back to the 0.2 percent scenario.
Over the past 24 months, Tether has accumulated around $11.9 billion in profits. With this amount of money, we could have distributed it all to shareholders, so everyone would be happy. Instead, a portion is being added to the reserve to further support the stablecoin, and the rest is basically kept in the investment arm.
What is your venture investment thesis? It sounds like you are looking beyond the cryptocurrency industry.
We come from Bitcoin: we are Bitcoiners at heart. We may not be perfect as human beings, but we are trying to carry with us the spirit of Bitcoin in terms of financial freedom, freedom of speech and freedom of access to technology in every company we invest in.
The concept of decentralization can be applied to different areas, such as artificial intelligence. We are already seeing how AI is becoming very politicized. We believe that having an actor independent of the classic players, such as Amazon, Microsoft and Google, is going to be very, very important.
The same goes for another important technology: the brain-computer interface (BCI). It will be crucial in the future. It will be very important to build brain-computer interfaces that respect people’s privacy, that ensure that data remains local and is not collected by the same companies that run social media platforms.
We are not a classic VC. We don’t invest money in companies just to try to find a unicorn that will make us 100 times more. Of course, that would be nice, but it has to be aligned with our vision. Interdependence, resilience and disintermediation – these terms are very important to us.
How much capital will Tether commit to venture investments?
We will always prioritize the stablecoin business, because risk management is very important. Right now, we have a good buffer on the reserve, but if USDT continues to expand, we will expand it proportionally.
But almost everything else (I’d say over 90 percent of the profits Tether makes) we’ll reinvest in things that matter to us and our community. We don’t need to hand out huge amounts of money in dividends.
Some venture capitalists have done a poor job of assessing the reputation of cryptocurrency founders, some of whom, like Sam Bankman-Fried, were later convicted of fraud. How do they plan to ensure Tether doesn’t make the same mistakes?
The only way to save the invested capital is to analyze every detail and do the highest level of due diligence. Not every investment will be perfect, but we will engage in each venture with heart and mind to ensure the maximum result.
