Tether’s Apocalypse Strategy | SEC Targets Robinhood

“There is this concept of removing intermediaries in crypto that can be applied to many other things,” says Tether’s new chief executive, Paolo Ardoino, who had served as its chief technology officer and spokesperson since 2017. “We feel like 90% of technologies, if not more, are built for the best case scenario but no one is building the tech for the worst case scenario,” adds Ardoino, 40. “If there is a catastrophe, I’m not saying that there has to be a huge war, but anything can happen, and we are not prepared for that.”

In bitcoin mining, the company is aiming for 5% market share, which would make it one of the larger participants. Ardoino says  “If you think of bitcoin as the ultimate form of money, you know, built for the apocalypse, you don’t want the majority of bitcoin mining being concentrated in one country.” So the company is investing in a project powered by renewable energy in El Salvador and has its own operation in Uruguay for starters. For AI, it paid $420 million to buy 10,000 Nvidia chips that it plans to rent out to startups in a partnership with Northern Data. Its education division aims to teach skills for blockchain, AI, programming and design and has already launched initiatives in Thailand and Georgia. 

Tether is rolling in cash, having reported $6.2 billion in profit for 2023, and its four principal owners are already among the 14 richest people in the world. The company’s future is not necessarily trouble-free, though any troubles are on the far horizon thanks to a powerful business model that benefited from rallies in gold and bitcoin and from rising interest income on bonds that back its eponymous stablecoin. It’s a secretive company based in the British Virgin Islands that depends on people trusting its cryptocurrency and collateral that backs the tokens, and there are regulatory threats emerging in the U.S. Whether its new businesses will prove successful is anybody’s guess, but at least the company is hedging its stablecoin bet as it girds for the apocalypse. 

In the absence of federal legislation defining how cryptocurrencies should be treated, the SEC has relied on its interpretation of existing law that the digital assets are securities. The main buttress for its argument is a 1946 court ruling in a case concerning Florida citrus groves that defines securities as assets based on investment contracts. The agency insists that almost all cryptocurrencies are based on investment contracts—excepting only bitcoin and maybe ether—and that they therefore fall under SEC jurisdiction. The crypto industry argues that they are not, and the matter is being fought out in cases that the agency has already brought against high-profile exchanges that include Coinbase, Kraken and Binance. 

Robinhood complains that it has tried to register as an exchange, but that the SEC refuses to allow it to do so. Chief Legal, Compliance and Corporate Affairs Officer Dan Gallagher said in a statement the company is “disappointed” the SEC issued the notice, adding: “We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law.”