In Short:
Tether is diversifying into venture capital after earning $11.9 billion profit over the past two years due to rising interest rates. While prioritizing the stablecoin business, Tether plans to invest over 90% of its profits in ventures that align with its values, focusing on technologies like AI and brain-computer interfaces, all while ensuring thorough due diligence in selection.
WIRED: Tether Diversifies Business Model with Venture Capital Move
Business Model Diversification
Tether has strategically diversified its business model this year by venturing into the realm of venture capital. This move comes on the heels of the company’s substantial profitability over the past two years, largely attributed to rising interest rates. According to Paolo Ardoino, Chief Technology Officer of Tether, the company has witnessed a remarkable increase in profits, now able to earn approximately 5.5 percent on reserves, compared to just 0.2 percent when Tether was first established.
Profit Utilization Strategy
Over the last 24 months, Tether has recorded profits nearing $11.9 billion. Rather than distributing these profits solely to shareholders, the company has opted to bolster its reserves to further back its stablecoin, while also redirecting funds to its investment arm.
Venture Investment Focus
Regarding the venture investment thesis, Ardoino emphasized that while Tether has origins in the bitcoin ecosystem, the company’s vision extends beyond cryptocurrency. Tether aims to embody the principles of financial freedom, freedom of speech, and access to technology in all its investments. Ardoino pointed out that decentralization is a concept that can be harnessed in various sectors, including artificial intelligence. With the growing politicization of AI, having companies independent from dominant players like Amazon, Microsoft, and Google will be crucial.
Future Technological Innovations
Ardoino also highlighted the importance of brain-computer interfaces (BCI) for the future, advocating for developments that prioritize user privacy and ensure that data remains local rather than being exploited by major social media companies.
Investment Philosophy
Tether distinguishes itself from traditional venture capital firms by not simply seeking to invest in high-risk opportunities for exponential returns. Instead, the company prioritizes alignment with its core values of interdependence, resilience, and disintermediation in every potential investment.
Capital Commitment to Ventures
While Tether is focused on expanding its stablecoin business, Ardoino reassured that risk management remains a top concern. Currently, the company maintains an adequate cushion above its reserves, allowing for proportional growth in response to the expansion of USDT. Ardoino stated that over 90 percent of Tether’s profits will likely be reinvested in initiatives that resonate with the firm’s vision and community needs, rather than issuing large dividends.
Due Diligence in Investment Decisions
In light of past missteps made by some venture capitalists with regard to the evaluation of crypto founders, such as the case of Sam Bankman-Fried, Tether is committed to rigorous due diligence. Ardoino reiterated that comprehensive assessments of potential investments are paramount to safeguarding the company’s capital. While not every investment may yield perfection, Tether’s approach will involve thorough evaluation to maximize outcomes.
