Tether’s $110 Billion Empire: How They Built It - Reeve Collins, сo-Founder of Tether

Good morning and welcome to day two of Proof of Talk. My name is Gareth Jenkinson. I'm the head of multimedia here at cointelegraph. And this is our first live stream of the day. I'm very excited to chat to Reeve Collins, a man who's very well known for co founding Tether. And I think we're just going to start the conversation there, take us back in time. Tell us about the genesis story of Tether, how, how you started it, what it was then versus what it was now, what it is now.

Well, it's definitely quite a story and it's really, really amazing to see where it's come and how it's just laid the foundation for the entire cryptocurrency ecosystem. And so just seeing that come to fruition does make me very proud. But, yeah, you have to rewind all the way back to 2013, which is when I first got into bitcoin. And Brock Pierce was a good friend of mine and, you know, we used to hang out a lot and I was just really wanted to dive into something new. And he's like, look, you got to buy some bitcoin. So I just really started getting into the space in 2013, and then a lot of discussions and a lot of time later and an idea came up which was putting the dollar on the blockchain. And back then there was only about five cryptocurrencies, and so just the whole market was maybe two to three billion dollars. So it was really small and nascent, but the concept is pretty straightforward. We had a new way to move money globally instantly and for free. The problem at that point in time was the type of money we were moving was bitcoin. So it was super unfamiliar. It was this new type of foreign currency based in code, and people just didn't get it. It was such a small amount of people trading it, but the blockchain really allowed you to do something unique and different, which was move that money and confirm those transactions. So the concept was format dollars, euros, yen, to work on the blockchain, just create that bridge, tether it to the dollar. And so that's how it rolled out. And then back then, you got to think we were the first people to really tokenize any real world asset. So we tokenized the dollar, and so we had to build the technology. And so Craig Sellers was part of Mastercoin at that time, so he came on and co founded it with us. Yeah, sorry about that. Just turned off my phone.

The rule is you have to take the call and no I'm taking.

Anyways. And we really utilized Mastercoin, which is now Omni, to write messages to the Bitcoin blockchain, and built that tech out and really just put that out there. And that's when Bitfinex came in early on, because they're the ones that had the first use case. So a lot of people didn't realize, okay, great, it might be nice to move money around the world. But who needed to do it because they weren't using the blockchain yet? So the way it evolved was the exchanges wanted to settle their order books amongst each other, and then soon after that, you know, they also. Then they started listing it, and then the traders realized, oh, I can. Instead of pulling my money out of the system, I can just put it on the sidelines, but stay in the arena. Like, I can trade from bitcoin into Tether on chain dollars. And then from there, once the traders use it amongst themselves, it rolled into payments because then they started paying other people. And then this was a slow rollout. It took about, you know, years and years for it to really start picking up. But then the whole world started feeling the power of it. And really Tether itself as a company and an entity really took off in 2017 after we were gone. We sold it earlier on in the ico. Boom. And I gotta hand it to Paolo and the team there. I mean, they're extraordinary humans and they've just done a really fantastic job. So, again, I couldn't be more proud of where it's ended up.

If you are joining us on the livestream on X or YouTube, please feel free to drop some questions in for Reeve. If you want to know about the genesis story of Tether, why you got out of Tether, it's up to you. We've got him here. We've got him here on the live stream. So fire away with your questions and we will ask them through the course of this conversation.

And let's add some even more exciting questions about what I'm doing now, what I've done since, and where the future is going.

There we go. Yeah, I do want to probe that very quickly. The founding partner sold to the right in 2015. Maybe my history is a little bit wrong. Why at the time did you make that decision? And all these years later, just considering how profitable a business is, you know, is there any lingering regret about that?

Look, hindsight's always 20 20, but we always live our lives, and we all do our best to live our lives with no regrets. So I'm extremely proud of where it's come, what it's turned into, and just the significant impact it's had on the world and how it's shifting the future of finance and how it's lifting people out of poverty and giving a lot of people a chance. And that's why I also seen Tether being moving its headquarters El Salvador and focusing on Central and South America. Those are the people that need it most. So it's just, I mean, it still gives me chills just to see that. That impact that it's had. So. So it's amazing. But you have to rewind back to 2015. The market crashed. There was no business model. You have to realize what Tether's business model was. Right? It's make money on the float. How much float was there? Especially back then? None. And, and then it evolved into buying treasuries and other assets to back the currency. But the original promise of Tether, which they still hold true to this day, is give me a dollar, I put it in the bank, and I issue a token. So the elegance of its business model was in its simplicity and that concept, putting a dollar on the blockchain, moving money globally instantly for free, and democratizing access for the world to dollars, it's just proven to be a super powerful concept. So there are no regrets, there's just lots of pride. And I'm excited about building better, bigger, greater things in the future.

I mean, to think of Tether today, I've met Paolo many times and we've had many, many very interesting conversations about their approach that. It seems like they stumbled onto the easiest and best solutions when they started investing in treasury bulls. Right. Because it's a stable yield over a long period of time. Very, very low risk, fairly liquid. And I mean, to me, it's like once they figured that out, it seems like everyone else will want to go and do that because it's such a smart move. And it also allows them to generate profit of a business that would otherwise, like you said, just take a dollar and put it in the bank. Did you guys think that was part of the natural progression? Was it something you wanted to do back then? Invest in t bills?

Well, actually, it's like figure out how to, how to maximize the value that we're holding without compromising the security and the backing of the currency. And so, yeah, those are definitely the natural progressions. And what's amazing about the space now is that it's evolving. So fast forward 10 plus years and all these RWAs are coming on chain very high quality, low or very high quality and low risk assets that have decent yield. And those types of on chain assets are going to be utilized as backing for stablecoins and there will be decentralized stablecoins coming out. Because now that Treasuries and other assets are on chain, you don't need a centralized entity to be the one that buys your dollar, that buys your treasury and then mints the token. So I rolled out a new company called Stake stable.com stbl.com We've been working on it for about almost a year now. And all of the infrastructure is in place to do exactly that, where the user can buy a Treasury or another high quality RWA and post it as collateral and mint their own stablecoin. And when they do that, we strip the interest, we strip the yield into a separate token and so the user gets to keep the yield and then push out the non interest bearing stable coin. So it's not a yield bearing stable coin, so it's not a security. So there's going to be a lot of novel approaches to how the world utilizes stable coins. And right now stable coins are. It's the narrative, right? It's the vibe. Everyone's trying to create a stable coin and launch one. And there's a lot of reasons for it, the biggest one being the regulatory winds are at our back. Whereas for intel today it was right in our face. So that allows institutions to really get in and governments and the rest of the world to really get involved and utilize both blockchain technology and these types of currencies to make their businesses better. Because that's the entire point of what we're doing, right? Blockchain technology makes businesses and transactions more efficient. It connects the world. However, you need basically government approval or at least a path to be able to do that. And now that's here.

I've got a really great question here. I mean, there's always been a lot of controversy around tether, especially between 2017 and 2020. Rug Paul Max in the comments says Reeve, how much USDT did you print before there were any real reserves? I mean, this is a good chance to talk about some of the FUD over the years and how things actually worked.

All I can comment on is the fud. It was insane, wasn't it? Just crazy. But it just goes to show that anyone who's at the top of anything and doing something really revolutionary and on the cutting edge is always going to have haters, especially in our space, and they just want to tear you down for no other reason than there's just, there's such an easy way to do it now with online communications and social media that people just attack and attack and attack and there was never any substance to that. And so Tether has proven over and over and over again that the backing's there, that the dollars are there and that they're rock solid. And, and I used to always say, because people say, oh, Tether doesn't hold its peg. It's lost its peg over here, lost its peg over there. Those are third party exchanges. Those are the supply and demand on that particular venue. You can always go to Tether and redeem for the dollar. They're one of the only companies that does that type of redemption.

Another question here, Carlos. Ready? Tether. It's saying you, Reeve doesn't work.

I'm no longer with Tether. I don't represent them. I just admire them.

But yeah, it says Tether's planning to launch a new coin to comply with US and EU laws. Probably not EU laws, but I've spoken to Paolo and they're looking at doing a sort of compliant, newer sort of USDT for the US market. Would that mean that existing USDT holders are forced to switch or, you know, are unable to use those tokens going forward?

So again, I don't know the nuances, but I can give you an opinion from a high level. I'm betting that they're all completely fungible because the regulatory oversight is probably really specifically directed at where the value, where the backing is held and who the custodians are and what the type of backing it is. And so that flavor of Tether that has that regulatory backing can be whitelisted and sold to US customers, but once it's in the wild, it's in the wild and would almost guarantee they're going to be completely fungible.

My, my next question. Just a Stable coins in general Circle went public last, last week, like massive, massive valuation. Paulo. Paulo went to, you know, New York for the first time this year and you know, he said to me in private, like, we don't need, we, we don't want to be publicly listed. We don't need to be publicly listed. But it's very telling that the second biggest stablecoin issuer company is not now a publicly listed company. Do you view that as a natural progression of things? And is it good for the industry that a player like Circle is a publicly traded company?

First, I feel it's definitely good for the industry. What's not good for the industry is if it stock tanks.

Yes.

But there's so much hype and so much pent up demand to get involved in stablecoins because all of retail or all of the people that really aren't in the crypto space, they hear about it and then circle comes out and so they, they pile in and it really drove the price up and the fundamentals aren't quite there to support that level of price. So as long as people understand that a lot of it is market irrationality and it's excitement, which is really great, but when the price goes down, it's not a reflection on the business or the capabilities of what stablecoins have to offer.

Let's talk a little bit about life after Tether. I mean, you're one of the founders of PI Protocol, right? You're doing wefi now. How has your approach changed to working in this industry? And before we speak about Bitcoin, because I really want to chat to you about Bitcoin.

Sure, yeah. So there's been a lot of life after Tether and a lot of interesting things. So after bringing the stablecoin to market, the next big thing we rolled out was the first nft. So we really champion like brought to market and pioneered the NFT before there was word nft and that company was called Block V. We did an ICO and we called them Vadims, like these highly programmable digital goods because we, there was no word NFT for this but we, we wanted you to be able to uniquely own a digital object. The challenge with NFTs is they got a bad rap because they had this massive run up because everyone's speculating and gambling on images. But that's not really the best use case of NFTs. I still can't stress the importance of how much NFTs will impact our lives going forward. Because everyone's going to have a wallet. Those digital wallets are going to be filled with both tokens and currencies. But nft, because NFT is going to represent so many different facets of our life. So I created an extraordinarily robust technology platform that's still in use today, like Visa and then another company on top of that, Smart Media, and then Smart Media has done a deal with Visa and Visa is utilizing all of this technology that BlockV built for their Web3 wallet in the loyalty space. So that was a big chapter of my life and one that was also really exciting and impactful. And then, you know, and most recently, yeah, I launched a company called PI Protocol and that's what was rebranded to Stable a few months ago, stable.com because now there's another like Stable that just came out. But anyways ours is stbl.com and, and but that's just the. That's the evolution of the stablecoin. It's what I was talking about before. It's bringing technology that delivers on the promise of Web3. And what's the promise of Web3? It's that the users and the community and the people out there, the ones that reap the rewards and the benefits for participating in whatever service that platform provides. And with Stable, the users are the one that reap all the rewards. They're the ones that receive all the value from minting that stablecoin and then utilizing it and then in addition. So right now I'm creating this ecosystem of companies to deliver both on the promise of Blockchain and of Web3. And the other company is called WeFi Co, which is another really exciting company and it's the first ever decentralized on chain bank. So we call it a dio bank. The evolution of the Neo bank, which is just an online bank that still uses legacy rails to a decentralized on chain bank, a deal bank and that's WeFi. So it's just fully on chain and it packages all the familiar services you use like a card and loans, but also allows you access to DeFi. But what's most exciting about these new types of financial services is that when you can in a very easy to use user friendly way, plug into DeFi and earn 10 + percent on your savings account because it's topped up in stables and we do the hard stuff in the background to ensure that you get that level of return. It's super valuable for the end user. So wefi has built community first and really passing on all those rewards to the users.

This ties into a question we just got from the live stream. Anthony Palmeiro said you claim USDT in the US will be used like a checking account, but most Americans don't use stablecoins. Is it like fantasy hype? I think it's a good question and it kind of touches on what the genius act and a few other things will enable stablecoins to do in the US like be able to give you a yield on your stablecoin And I would imagine a future where people just stop using conventional banking rails and they just use a Web3 wallet and hold USDT and USDC and do those things. But I'm not the expert. You are. Maybe you can answer that one.

So you bring up a great point. And it's also nuanced. I've got a few answers to that. Step one, the reason why this gentleman said, you know, users in the US don't use stablecoins that much because we don't feel the pain. We are the privileged, right? Those of us that live in these first world countries are privileged. They have great financial services. We're the minority on this planet. So the rest of the world, again white tether is in Central and South America. They're the ones that feel the pain. They're the ones that this is life changing. It really makes a difference for them. So you have to put a more global lens on to see how big of an impact it has there. But back to the question of how big of an impact does it have in the US and the way you nuance it is like, why would they use traditional financial Rails when they can use a Web3 wallet and get higher yield? Soon, and I think very soon there won't be traditional financial Rails in a Web three Rails, there'll be financial services. You're going to log into whatever app it is that you use to log in and you're going to be able to do whatever it is you want to do. But you're going to have better, quicker, cheaper services that provide higher yield. Because within that app you can hold dollars or stablecoins and you have a choice. Hold dollars and earn a half a percent on your checking account. Hold stablecoins just by clicking a button and earn 8%. You know, it's, it's going to be up to the user. And so then the use cases and the choices become pretty obvious of what you're going to use. And so more and more in the normal course of whatever financial transactions you want to do under the hood is all going to be run on blockchain rails because it's more efficient.

Yep. There's another question here from the live stream crypto cap 7398. That's a weird username. Tether's ties with Cantor Fitzgerald and U.S. commerce Secretary Howard Latinik raised some red flags. How do they avoid conflicts of interest in the future? Do you think they'll be under a lot of scrutiny for those connections? Well, they've had a lot of scrutiny already.

They have been under the world's most intense microscope for years and years. And, you know, a lot of companies, especially in the US they feel a lot of scrutiny from the sec. And again, I'm just speaking as an outsider, but I would imagine that Tether has had not only scrutiny from the sec, but probably the equivalent body in all the other countries around the world. So I mean they are probably as squeaky clean as one company can be because of the level of inscrutiny. So how do they avoid the conflicts? They just, they're experts at it, I would guess.

My, my next question, I want to, I want to tie it a bit to, to Bitcoin. I do have a question here from the. Let's take this question from the live stream very quickly. Does the Genius X KYC requirements mean that Tether will collect user IDs and other data and could that impact how people view and use usdt? If you have any thoughts on that.

Again, the only detail, the only commentary I could make on that is I would assume that as you mentioned earlier, if Tether is thinking about launching a US regulated stablecoin and that was part of the regulation, then that US regulated stablecoin would do whatever that regulation requires it to do.

Yep, yep, that's it. I mean, I spoke to Paolo about a month ago in dubai at token 2049 and we spoke about Europe and why he didn't want to adhere with MICA regulations. And it's fascinating. He basically said not a lot of people understand the regulation. And if you're a stablecoin issuer in Europe and you have to abide by Mica's rules, you will have to keep all of your reserves in cash in a number of different small banks. But the problem is none of the big banks want to bank a stablecoin issuer like Tether. So, so you have to go to smaller banks. These banks, a lot of them run fractional reserve systems. You expose your users to systemic risk. And Paolo basically said if I don't have to, if that means I don't serve Europe and you can't use USDT in Europe, I'm okay with that. Because Europeans and Americans are privileged when it comes to payment systems, whereas developing nations need systems that hold value and we can transact very quickly. So I think that adds a little bit more nuance to that question. In particular, let's talk about Bitcoin. I'm a bit of a bitcoin maxi myself. I think a lot of the conversations I've had with some Bitcoin maxis when it comes to USDT and Tether in particular is it's kind of helping US dollar hegemony. And at some stage is that going to become a conflict of interest if we're all trying to get people to use Bitcoin and maybe see it go back to being more of a payment system than a store of value as it's widely regarded today.

I fundamentally don't believe that Bitcoin will ever truly be a payment system. Maybe it's a bitcoin backed stablecoin and that Bitcoin is using delta neutral hedging strategies similar to Athena and similar strategies. But Bitcoin itself will never be a. Like, why would you ever have anything that's volatile be a payment system? Right. So, so, so I, yeah, so Bitcoin's going to be a store of value and it'll have some other uses. But, but really again, digital gold, it's called digital gold for a reason because that's the closest thing to it, I think.

I spoke to Adam back about this in, in Las Vegas two weeks ago and he, he said this is something that Hul Finney said was going to happen like on the second day of the Bitcoin network. You know, it's. Bitcoin's going to end up being the global reserve and everyone's going to build a couple of layers on top of that. The second question to that, Elizabeth Stark and Lightning Labs are very close to rolling out stablecoins on Lightning. Right. Which I think is another interesting implementation because it takes things back to Bitcoin. It ties into the security assumptions you get from the bitcoin network. I mean, do we need to do that? In my mind, tether does it so well that everyone else is playing catch up. And the infrastructure, you don't need newer infrastructure to do stablecoins because it's perfectly good. What are your thoughts on that? Well, hopefully you have a different view.

There's, there's always going to be new infrastructure, new entrants and new people trying to chip away at the market leaders and enter into a space. And it's healthy, it's healthy competition because in the end of the day, who wins? It's the consumer. That's, that's what competition brings, is better products and better services. So it's just inevitable.

The last point that I want to touch on Bitcoin treasury reserve companies. You said you could say something about what you're doing in the space. Maybe you want to start with that and then I'll ask you a few questions about strategy. Made a Planet 21 Nakamoto, all these big, big name bitcoin treasury reserves.

Yes. A couple weeks ago there was announcement that I partnered with Chin Shu at CC Capital and we acquired a spacious and so that SPAC is going to find a target in the space that is doing digital assets. And so we're bringing together another digital asset, treasury play, and we're very excited about it and there'll be a lot more news on that coming soon. Okay, yeah, yeah.

So we can read between the lines there. It's following in a similar vein.

Yeah. So we put it out there, we're excited about it and it's really the future to bring it full circle. It's so crazy that, you know, a lot of people from the crypto space are now diving in so deeply into the traditional world. But this is just a signal of the merging kind of what I said before, of, of. Of crypto finance and traditional finance all merging and, and the fact that crypto companies and digital asset plays are coming or going public and things like that. It's just merging everything and getting the rest of the world involved in the crypto space.

Yeah, yeah. I think a final question just on the bitcoin treasury company, like, what are the risks in your mind? Because strategy has held up really, really well and you've got another. A load of newcomers offering convertible notes. Made a planet is a whole nother story just because of the how it works in Japan. But do you see some systemic risks and will there be some failures in the next five years?

I mean there's always going to be failures in every new kind of approach to whatever problem it is that people are trying to solve or service they're trying to offer. And yes, there are some risks and the risks are people getting too clever. So think of FTX and actually not ftx, that's more fraud. Let's think of Terra Luna, which was just, I would say, too clever. Right. They felt that they could artificially inflate and create this algorithmic stablecoin and pump it up. So what I'm saying by too clever in these public markets, people get over leveraged and they'll use some poor choices of the way they set up their convertible notes and the debt and it can really unwind and force that company and liquidate everything. And so the investors in those companies might go down based on poor management and poor decisions.

And that's exactly what Dylan LeClaire said to me from Adaplanet a few weeks ago. Thanks so much for your time, Reev. It was really great to chat to you. If you have any more questions, you can find Reeve online. He's doing a lot of amazing stuff in the space and he's one of the people we have to thank for tethering USDT and a really fantastic piece of financial infrastructure. So thanks so much for your time. Keep an eye on Cointelegraph social media throughout the day. We will be live again on X and YouTube right here from Proof of Talk, talking to some of the biggest names in the industry that are here at this conference. We'll catch you again shortly. Thank you very much.

Thank you.

Cheers. Thanks Re.