Tether Looks Beyond USDT: Preparing for the Future Challenges
Don’t place all your bets on a single option—an adage that Tether seems to embody. In a remarkable two-day span this April, the stablecoin powerhouse announced two significant initiatives: collaborating with Bitfinex, SoftBank, and Cantor Fitzgerald to create a Bitcoin-centric public company named Twenty One Capital, and increasing its stake in the Italian soccer club Juventus to over 10%.
These moves represent just the latest phase in Tether’s bold strategy to diversify beyond its primary USDT stablecoin. Such a strategy is becoming increasingly vital in light of growing regulatory scrutiny in major markets.
USDT
Tether introduced the USDT stablecoin in 2014 and quickly emerged as the leading stablecoin issuer, with USDT rising to become one of the top five cryptocurrencies by market capitalization.
At various times, USDT accounted for a significant share of Bitcoin trading, often between 50% and 80% of all transactions.
Additionally, USDT is crucial for facilitating cryptocurrency onboarding, as many exchanges lack fiat-to-crypto and crypto-to-fiat pairs. It serves as a US dollar alternative, offering a stable trading instrument tied to the USD value.
Companies utilize USDT for cross-border transactions, supported by U.S. Treasury bills, of which Tether holds a substantial amount. In the previous year, Tether purchased $33.1 billion in U.S. Treasury securities, ranking it as the seventh largest foreign net buyer, surpassing countries like Mexico, Canada, and Taiwan.
Tether Abroad
Originally registered in the British Virgin Islands, Tether moved its headquarters to El Salvador in January—marking the first nation to adopt Bitcoin as legal tender. Shortly after this relocation, El Salvador’s Congress effectively rescinded Bitcoin’s legal tender status.
Moreover, USDT continues to serve as an effective payment option in areas with limited debit card access and in jurisdictions under sanctions. In Africa, USDT fulfills a dual role as both a savings asset and a remittance tool. Countries such as Russia and Iran utilize USDT, alongside other cryptocurrencies, to navigate foreign trade restrictions.
However, Tether’s stablecoin faces ongoing legal challenges. For instance, its non-compliance with the EU’s Markets in Crypto Assets law led to the delisting of USDT from platforms like Coinbase, Kraken, Binance, and Crypto.com for EU users.
Moreover, impending crypto regulations in the U.S. could lead to a potential ban on USDT, especially with President Trump’s cryptocurrency venture, World Liberty Financial, planning to introduce its own stablecoin.
In response to these challenges, Tether is exploring a new stablecoin designed to comply with forthcoming regulations.
Legal Scrutiny
Last year, U.S. authorities claimed that Tether engaged in money laundering and sanction violations. CEO Paolo Ardoino has categorically denied these allegations.
“At Tether, we frequently engage directly with law enforcement to help prevent the misuse of USDt by rogue nations, terrorists, and criminals,” Ardoino stated in October. “If we were under investigation, as the article falsely claims, we would know. Therefore, we can confirm that the allegations in the article are entirely unfounded.”
See below.
At Tether, we deal regularly and directly with law enforcement officials to help prevent rogue nations, terrorists and criminals from misusing USDt. We would know if we are being investigated as the article falsely claimed. Based on that, we can confirm that the allegations in…
— Paolo Ardoino 🤖 (@paoloardoino) October 25, 2024
Although losing access to markets like the EU and the U.S. would greatly impact Tether, the company offers more than just USDT, so business diversification may help mitigate these risks.
Other Ventures
Beyond stablecoins, Tether also invests in Bitcoin mining. For instance, the company owns a 21% stake in Bitdeer, operates mining in Uruguay, and is part of a collaborative effort to develop a $1 billion Bitcoin mining facility in El Salvador called “Volcano Energy.”
Plans for expanding Bitcoin mining were laid out in 2023, with Tether announcing a $500 million investment in this sector, including partnerships with Northern Data AG and setting up mining operations in three countries. After acquiring 10,000 Nvidia H100 GPUs—popular among AI developers—Tether now holds a 20% share in Northern Data. As of April, the current status of these plans remains unclear.
Tether has also ventured into artificial intelligence, making a strategic $200 million investment in Blackrock Neurotech, a leader in neuro-prosthetics, thereby becoming the majority stakeholder.
Additionally, Tether invested $775 million in Rumble, a video platform catering to a far-right audience, and supports Fizen, a payment service and self-custody wallet. The company has also launched Holepunch, which enables software development without server reliance.
Other initiatives hinted at by Ardoino on social media include a tokenization platform and power kiosks in Africa equipped with educational resources on cryptocurrency.
As a result, even if USDT is banned in various regions, Tether remains a multifaceted organization. However, critics caution that Tether’s utilization of customer funds for substantial investments could lead to adverse outcomes.
According to Forbes, Ardoino emphasizes the importance of diversification: “It’s essential to have resilient currency, but if that’s all you have and everything else is centralized, it can be quickly eradicated. One of our mottos is ‘build for the apocalypse’.”