WIRED: This year, Tether is diversifying its business model by taking on venture capital. Can you explain why?
Arduino: Tether has been very profitable over the past two years thanks to rising interest rates. When Tether started, you could earn 0.2% on your reserves, and now you can earn 5.5%. Of course, this may be time-limited. We have heard of possible interest rate cuts, but even with inflation at 3% or 4%, it will be very hard to go back to a 0.2% scenario.
Over the past 24 months, Tether has made about $11.9 billion in profits, an amount they could have distributed to all shareholders and made everyone happy. Instead, some of it has been added to a reserve to further back stablecoins, and the rest is essentially held in an investment arm.
What is your venture investment theme? It seems like you’re thinking beyond the cryptocurrency industry.
We come from Bitcoin and are Bitcoin lovers at heart. We may not be perfect people, but we strive to carry on the Bitcoin spirit of economic freedom, freedom of speech, and freedom of access to technology in every venture we invest in.
The concept of decentralization can be applied to many different fields, such as artificial intelligence. It is already clear that AI is highly politicized. I think the presence of players independent of traditional actors like Amazon, Microsoft, Google, etc. will be very important.
The same applies to another important technology, namely brain-computer interfaces (BCI), which will be fundamental in the future: it will be crucial to build brain-computer interfaces that respect people’s privacy and ensure that data is kept locally and not collected by companies that run social media platforms.
We are not a typical VC firm. We don’t put money into companies just to find a unicorn that will make us 100x. Of course, it would be great if that were the case, but it has to be aligned with our vision. Interdependence, resilience, and disintermediation. These words are very important to us.
How much capital does Tether plan to put into venture investing?
Risk management is very important, so we will always prioritize our stablecoin business. Currently, we have a sufficient buffer on top of our reserves, but as USDT continues to grow, it will grow proportionately.
But almost everything else, over 90 percent of the profits that Tether makes, we intend to reinvest in things that matter to us and our community. We don’t need to distribute huge amounts of money as dividends.
Some VCs have not done a good job of character assessment of crypto founders, and some, like Sam Bankman Freed, were later convicted of fraud. How do you think Tether can avoid making the same mistake?
Looking into every aspect thoroughly and doing thorough due diligence is the only way to ensure you save on the capital you invest in. Not every investment is going to be perfect, but we put our heart and mind into every company to ensure we get the best possible results.
