WBD297 Audio Transcription

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Questions for Tether with Paolo Ardoino & Stuart Hoegner

Interview date: Sunday 10th January

Note: the following is a transcription of my interview with Paolo Ardoino & Stuart Hoegner. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk to Paolo Ardoino & Stuart Hoegner the CTO & General Counsel at Bitfinex. We discuss Tether FUD, the claims of not being fully backed and price manipulation.

“We don’t believe in suing our critics into silence… we think it’s better to counter fiction with facts.”

— Stuart Hoegner

Interview Transcription

Peter McCormack: Right, hi there, Paolo, Stuart, how are you both?

Paolo Ardoino: Hey, Peter, I'm doing well thank you.

Stuart Hoegner: Great thanks, Peter.

Peter McCormack: All right, guys.  Well listen, look, thanks for sending me this PR release in advance so I make sure I can cover everything you've done and all the naughty things that Tether have done.  And, thanks for paying me for doing this and all the bullshit they've been saying! 

Look, let's get this straight from the start.  You haven't paid me to do this.  My position on this is completely I don't believe in the Tether FUD; everyone should listen.  I've done the research.  I think there are questions that need answering though, and I'm going to push on those.  There are no questions I'm not going to ask.  If you can't answer because of litigation, say; but, if I want to ask it, I'm going to ask it.  Are you okay with all that?

Paolo Ardoino: Yes.

Stuart Hoegner: Absolutely.

Peter McCormack: Right, cool.  Let's get on with this.  Okay, let's start with you, Stuart.  Can you just explain to me, and to other people that are listening, because they probably don't really fully understand it, how are tethers issued and redeemed?

Stuart Hoegner: Okay, so let's be clear on our terminology if we're going to talk about issuances and redemptions.  We use four principal terms when we talk about this: authorised tethers; issued tethers; redeemed tethers; and destroyed.

So, authorised tethers are tokens that are created on a blockchain and they're available for issuance to the public.  This process involves multiple blockchains and multiple persons participating to sign transactions, creating transactions.  Once created, they're available for sale to third parties but until then, they sit in Tether's treasury as authorised but not issued.  These authorised but unissued tokens are not counted in the market cap of tethers as they have not been issued or released into the ecosystem.  So, you should think of them a little bit like inventory.  An inventory of products, they're sitting on a shelf awaiting purchase. 

Issued tethers are authorised tokens in actual circulation and they have been sold to customers by Tether and are fully backed by Tether and the reserves, unless and until they're redeemed.  As tokens are issued, the stock of authorised tethers, but not issued, is depleted and they're replenished through authorisation of new tokens, based on market demand.  When that happens, this is what Paolo's referring to in his PSAs on the replenishment of the Tether inventory.  This is adding to the authorised and unbacked and ready for sale, but not issued, sold and backed tethers.

Peter McCormack: Okay, why do you need to do that, because I would have thought the creation of tethers is a very simple and easy job; why do you need to leave them on the shelf?

Stuart Hoegner: Well, it's a straightforward job, but it's an important job, and it's one that comes with security risks, and Paolo can speak to this a little bit.  But, there are security risks involved in using sensitive private keys to create new tethers authorised.  So, to have those at the ready and not in the marketplace, not backed, that exposes those keys to less risk.  And, that's not just a theoretical risk; there is a serious security risk associated with that.  Paolo, do you want to speak about that?

Paolo Ardoino: Yeah.  I believe that we can think to Tether authorisation private keys as among the most important sets of private keys; the private keys in our industry.  So, if you get hold of the private keys, you can really issue any amount of tethers you want.  So, what we want to do is to limit the number of times per week when these private keys get doxes by signers.

So, having semi-signed, or a raw transaction, unsigned raw transaction that gets prepared with a fixed amount and then signed when they need to, that really helps Tether security; because, then you can see that we are issuing round numbers like $200 million, right.  So, it means that we pre-prepared a raw transaction that is an authorisation transaction.  Then, Tether signers sign that transaction and broadcast it and as Stuart said, we are leaving a bit of inventory on the shelf in order to fulfil what we think that future requests from customers could be.

So, you know, on our day-to-day activity, we are always in talks with customers, so we have a good sense of what they might need.  They ping us in advance and say, "We might need this amount [or] we might need that amount of tethers".  So, in time we learnt how much tethers we should authorise in advance and keep on the shelf in order to make these tethers available as soon as they are needed; but, at the same time, also protecting the security of Tether, not continuing to touch the private keys every single time there is one issuance.

Peter McCormack: Okay.  I'm going to just push back on you saying they're the most important private keys in the industry.  I would say personally, my private key is the most important one.  Outside of that, I would probably say whatever the biggest honey pot is, maybe Satoshi's private keys, are the most important, because Bitcoin is completely censorship resistant.  Tether isn't, right?  You can, if required, censor transactions; you can, if somebody issued a bunch of fake tethers, you could block those, I believe?

Paolo Ardoino: So, first of all I agree that Bitcoin private keys are -- everyone's private keys are like their own babies, so no doubt about that.  So the difference, as you said, is that if someone gets hold of private keys of Tether, they can issue anything that they want; while, in Bitcoin, if someone gets hold of the private keys, they can just steal the funds of the people that got hacked, rather than minting fake Bitcoins.  So, this is important and this is the reason why we want to keep these private keys so secure and touch them as little as possible.

So, yes, we can freeze fake tethers.  At the same time, you can imagine that if someone gets hold of the -- in order to freeze tethers, someone has to have the private keys.  But, if someone has already the private keys, then he can unfreeze our attempt to freeze tethers.  So, it will become an endless attempt of freezing, unfreezing, and trying to save tether.  That is not ideal. 

The responsible thing to do is touch the private keys as little as possible and use, of course, for every blockchain, we use a multi-seed approach; so, there are multiple private keys that are held by different signers, geographically different, so that we can ensure the highest security possible in all our operations.

Peter McCormack: Okay, all right.  Stuart, I interrupted you.  You were going to talk about redemptions; we should finish that bit off?

Stuart Hoegner: Sure.  So, redemptions are just when customers send their tokens back to Tether and they get fiat back in return.  The tethers, those tokens, then go into inventory, back to inventory, like the products that have been returned to inventory and are awaiting future purchases.  And then, those tokens can be held by Tether in its treasury or destroyed.

And then, destruction's just multisig transactions being broadcast to reduce the number of outstanding tokens existing on the selected blockchain, and those tokens are forever eliminated.  Basically, that's the reverse of authorisation.  So, with those four concepts, you have the life cycle of the tether.

Peter McCormack: Okay, so Paolo, who is using Tether; I would like to understand that?  What are they using it for and what is the KYC process for people who want to use Tether?  And actually, I'll throw another one in there: who can't; like, who applies and who do you turn down?

Paolo Ardoino: So, okay.  Let's start from who uses Tether; I think Stuart can speak better about the KYC AML process.  So, Tether was born in 2014.  It started from Omni layer and the reason why it was born is because there was an issue among crypto trading exchanges.  So, in 2013, Bitcoin reached, for the first time, $1,000; but, across different exchanges, you could see that the spread was $200 to $300, and the reason was pretty simple.

Bitcoin moves with a pace that is every ten minutes, so it can get credited and moves basically with a pace of ten minutes, because that is the average block time; while dollars and fiat in general moves much slower.  So, you send a wire and it can take one day, five days, and that was not allowing proper arbitrage across platforms, and that is really important for healthy markets.  So, you don't want to have OKCoin to be $1,000 and Bitfinex to be $1,300 and so on. 

So, that is the job of arbitrage issuers.  They step in and try to close these gaps, but with just fiat, this was just really difficult in 2014.  It's slightly better now, but definitely you want to let both the legs of a trading pair, like BTC/USD, so the two legs are BTC and USD, move at the same speed, at the same pace; and, the only way to do that was to use the same underlying technology.  So, Omni layer was and is using Bitcoin, underlying Bitcoin transactions to move tethers on chain.  So, that was the perfect use case and so, Tether was born for that specific reason, so to solve that problem.

Now recently, of course, we started to look into different use cases, because I believe that it's the time that Tether should outgrow the crypto market.  Of course, that is still our main market, but we are looking to working with ecommerce, businesses that offer remittances, businesses that want to optimise their payment solutions that can be payment for salaries, for inventory, for anything.  So, we get bombarded on a daily basis of requests, and that's pretty awesome, because we don't want to be only for crypto.  We were born crypto, we want to go on a global scale.  So, Stuart may want to touch base on our process of onboarding customers, maybe?

Stuart Hoegner: Sure.  So, I'm always happy to discuss this because, contrary to the online characterisations in some quarters, Tether has an outstanding compliance programme.  Our AML and our CTF sanctions programme has been built to exceed or meet the standards of the US Bank Secrecy Act and applicable BVI laws.  We work hard to detect, monitor and deter AML/CTF violations and our programme is tested periodically by independent third-party auditors.

We always work to understand the identity, business type, source of funds and the related risks of each and every customer on Tether, and we conduct enhanced due diligence on all customers.  We risk rate every customer, we monitor all customers using World-Check and we deploy Chainalysis to detect potential crime related to our services and users.

We regularly help international law enforcement agencies with investigations in order to trace, and potentially freeze wallets.  Also, Tether will share information with law enforcement when given valid legal process, and we've helped law enforcement and victims to freeze and return millions of USDTs.  So, that's a bit of an overview of our compliance and what we look to.

Peter McCormack: Have any customers ever lost their account?

Stuart Hoegner: Lost their account?

Peter McCormack: Yeah.  Have you ever closed people's accounts, they can't work with you anymore?  Have there been any instances where you've tracked behaviour and like, "You can't work with us anymore?", or has everyone kept a clean relationship?

Stuart Hoegner: No, we have ended relationships with customers in the past, sure.

Peter McCormack: Yeah, okay; interesting.  In terms of the issuance of tethers, there's a lot that seems to happen on times when banks essentially would be closed, right; so, weekends and holidays, there were certainly some over the holiday break, and I've seen people commenting on that thing.  How come that's happened; how come you're able to do that?

Paolo Ardoino: I will take this one.  You're right, there is a lot of misconception and FUD around this very point.  You would expect that you go to HSBC on a Sunday and it is closed, so you cannot move your money, right?  We, as Tether, are using Deltec as our primary bank, and most of our biggest customers are banked into the same bank.

So, during the weekends, during all the days, there is always personnel from the bank that allows internal transfers between accounts; so, Tether has its own account and, let's say, Customer A has his own account.  So, Customer A wants to acquire their tethers, so they ask the bank personnel to do an internal transfer from their account to Tether's Deltec account, and that gets settled and is available immediately to Tether.

So, when we issue tethers, they are fully backed, because we already received the internal transfer.  So, I know that people -- the problem, people are making fun of the fact that we are issuing over weekends is just pure understanding of how the financial market of the banking system works.

Peter McCormack: Okay.  You mentioned Deltec there.  Are you shareholders in the company; in the bank?

Stuart Hoegner: We don't talk about the investments that we have on Tether's side.

Peter McCormack: Okay.  So, are tethers fully backed?

Stuart Hoegner: Look, the short answer is yes.  Every tether is 100% backed by our reserves, and those reserves including traditional currency and cash equivalents, and may include other assets and receivables from loans made by Tether's two third parties.  Now, that lending includes the loan to Bitfinex, which currently stands at a principal balance of $550 million; the principal having been paid down ahead of schedule.  The loan is on commercially reasonable terms; all interest is prepaid to the end of this month; and, it's otherwise in good standing.

Every USDT is also pegged 1/1 to the dollar.  So, USDT is always valued by Tether at 1 USDT to US$1.  Tether has always been able to honour redemption requests and to put it simply, there has never been a single instance in which Tether could not honour a redemption, and our detractors can't point to one, because one doesn't exist. 

In fact, there's considerable evidence of USDT being redeemed by our customers freely.  So, Dan Matuszewski has talked about this before.  Ryan Salame just recently spoke about this; confirmed that.  We can't share specific information about customers because of confidentiality concerns, but they are free to share that information with the market if they wish.  So, let me just ask if anyone seriously believes that we could be put under the microscope in the way that we have and still be operating, if we weren't backed; it defies logic.

So, let me touch on one issue here that might be of interest to your listeners.  The 74% number that's come up from time to time, specifically in the context of Tether's backing, this is another number that's been talked about a lot, and I want to be clear about this and give some context. 

I swore an affidavit in New York in the New York Litigation with the AG on 30 April last year, and that affidavit contained a number of items, including touching on Tether backing.  And, in that statement, I said that, of the then $2.1 billion in reserves, and today just for context that amount has grown to $22 billion.  Tether had cash and cash equivalents on hand representing approximately 74% of the current outstanding tethers, and that referred to issued tethers.  Remember we were talking about authorised and issued, etc; that was issued tethers.

So, people took from that that I said this means they're only 74% backed.  But, that's not correct and that's not what I said.  It meant and means that the reserves were 74% cash and cash equivalents.  Tethers were and are 100% backed by reserves.  So, the loan to Bitfinex is still good backing.  Interest has been paid ahead of schedule, as I said, and principals have been paid, again, ahead of schedule.  So, that forms part of Tether's reserve backing.

So, maybe people object to the amount of the backing, but it's not nothing; it's a valuable and productive asset.  And just note that that loan is now $550 million, as I mentioned, out of almost $22 billion in reserves, or 2.5% of the total.  So, I just want to be clear about the nature of the backing and the context, and our overall asset max on that point.

Peter McCormack: Okay, so you talk about the backing, about currencies and different currencies.  Is any of the backing in Bitcoin?

Stuart Hoegner: We were very clear last summer in court that part of it is in Bitcoin and if nothing else, there are transaction fees that need to be paid on the Omni layer.  So, Bitcoin was and is needed to pay for those transactions, so that shouldn't come as a surprise to anyone.  We don't presently comment on our asset makeup overall, as a general matter, but we are contemplating starting a process of providing updates on that on the website this year, in 2021.

Peter McCormack: But, you have to manage the assets that back the tether?

Stuart Hoegner: Sure, absolutely.

Peter McCormack: Are there any instances where you are buying Bitcoin because you think it's a good asset to hold within the basket?

Stuart Hoegner: Again, we don't comment on the basket of assets as a general matter, but we are exploring providing updates on that on the website in 2021.

Peter McCormack: Okay, because that's one of the areas where people will be like, "Hm, they can issue tether; they can buy the Bitcoin which backs the tether at the right time in the market", and that's where people might say that you have the ability to essentially pump the market?

Stuart Hoegner: Well, hold on; we don't have the ability to buy the Bitcoin at the right time in the market.  We're not prognosticators about whether the market's going to go up or down.  That presumes some level of clairvoyance that we know when markets can go up or down, which we don't have.

Peter McCormack: No, I don't mean that.  I just mean that, if you have to manage your basket of assets, and if Bitcoin was, say -- any investment you have to make, you have to make a decision; you could make a decision and say, "Look, we believe that Bitcoin would be a good investment right now", and you could issue tethers to buy Bitcoin?

Stuart Hoegner: No, we don't issue tethers to buy Bitcoin.  We issue tethers to customers that want tethers.

Peter McCormack: So, how does Bitcoin end up within your basket?

Stuart Hoegner: Well, as I said, if nothing else, Bitcoin is there to pay for transactions on the Omni layer.

Peter McCormack: No, but how does it get there; what's the process of the Bitcoin reaching your basket?

Stuart Hoegner: Paolo, do you have any comments on that?

Paolo Ardoino: So, I'm not sure if the question is really clear.  Are we talking about the fact that how we acquire the Bitcoin that we need in order to fulfil the Omni layer transactions?

Stuart Hoegner: So, how do we get that Bitcoin Paolo?

Paolo Ardoino: Well, these Bitcoins are, well, I would say, are a good amount of Bitcoin remaining from past acquisition that we likely did in 2015/16 that, you know, with the fact that Omni layer is slowing a bit down compared to the other blockchains that we are supporting, the amount of Bitcoins that we got a really good price in 2015/16 is probably enough for perpetuity.

Stuart Hoegner: But again, Peter, let me emphasise, this has been in the public record since at least last summer.

Peter McCormack: No, that's fine.

Stuart Hoegner: So, in my view, this isn't new, or shouldn't be new to anyone.

Peter McCormack: No, what I'm trying to understand is, if it's only Bitcoin that's held for transactions on the Omni layer, I understand that; but, if Bitcoin is held within the basket because it's seen as a good asset to hold, then how does it end up in there?  I'm just trying to understand that.

Paolo Ardoino: But, why we should issue, even in the case someone would like to add Bitcoin to its own basket, why issue tethers to do that, right?  So, there are fiat exchanges, so if someone want to manage his portfolio, he would just take part of dollars and buy Bitcoins.  So, why issue in tether to do so?

Peter McCormack: I don't know; that's why I'm asking.

Paolo Ardoino: The entire concept of us issuing tether to buy Bitcoin for ourselves doesn’t make sense.  So, why issue in tethers when we have already the dollars and we have the ability to manage our inventory and our portfolio; so, we could just use the dollars, right?  So, the entire narrative is complete nonsense, right.  So, why we have to do two steps when we can do one?

Peter McCormack: That's fair, okay.  In terms of an audit, this is something that comes up over and over, and I discussed this with Phil Potter a long time ago.  I know you've got it on your website, but people don't trust your own lawyers providing the audit.  Is there anything stopping you having a full and independent audit?

Stuart Hoegner: So, we spoke about this two-and-a-half years ago, when we said that we couldn't get an audit; in part, because of the amount of business that we had as a single financial institution at that time.  We have provided consulting reports from an accounting firm, I think you're referring to these in your question, from a law firm, Freeh Sporkin & Sullivan, a firm of ex-federal judges and ex-Director of the FBI; and a letter from our banker.  And those were good faith efforts to try to provide transparency and some of the comfort that assurance services would provide.

We said at the time that we continued to search for new ways to bring more information to the community.  I mentioned Ryan Salame's remarks earlier recently; that's part of those efforts.  Interviews like this are part of those efforts.  Public comments from our bankers are part of those efforts.  So, we continue to look for useful ways to share information with the community, to be more open and transparent, and we have important plans in that regard for the coming year, but I can't into specifics on that just now.  So, all I can say on that one is, stay tuned.

Peter McCormack: Well, we can keep talking.  Okay, so the reason I reached out to you is I get a lot of DMs, a lot of emails, and just suddenly over the last couple of weeks, I've had so many about Tether.  And, I'm posting things online and people say it's Tether manipulation, and I hadn't seen it in a long time.  Now, I've done my own research.  I don't believe Tether is manipulating the market.  I believe a lot of what you said, in terms of your --

Stuart Hoegner: Few serious people do.

Peter McCormack: No, that's what I realised; few serious people do.  So, my question really for you is, where do you think this is coming from?

Stuart Hoegner: That's a good question.  I couldn't hazard a guess.  I think it's probably nocoiners that just don't believe in the Bitcoin project and by extension, they don't believe in Tether.  It could be people with their own agenda.  But, it's really not for us to speculate.  But, we've noticed the same thing, Peter.  This comes up from time to time, almost on a six-month schedule.  Every six months or so, there's some kind of huge push to get a whole bunch of FUD out there, and it can vary as to the reasons why.  This current batch might be related to the 15 January feed that people have been talking about, and the NYAG litigation.

Peter McCormack: Well, I'm going to ask you about that.  But, you've got people like Nouriel Roubini, Amy Castor, Frances Coppola, who are all quite openly accusing you of manipulating the market and running a pump with Tether to pump Bitcoin.  So, they're quite serious allegations from quite known profiles; have you not considered any litigation against them for libel?

Stuart Hoegner: Look, we don't believe in suing our critics into silence.  We have never made a claim against anyone for defamation; it's not to say that we wouldn't ever, but it would be a high bar.  We think it's better to try to counter fiction with facts and truth.  And in fact, contrary to what some may think, we're not particularly litigious people.

That obviously, for whatever it's worth, extends to journalists as well.  We're not about to hail Forbes Media into Federal Court, New Jersey.  So, as to why Nouriel, why Frances, why Amy are engaging this kind of discussion, these kinds of statements, you'd have to ask them.

Peter McCormack: Yeah, fair enough.  Okay, if you look back historically, because you've had all these accusations, you have to deal with all this pressure; is there anything you look back and you think, "Okay, we did that wrong, we handled this in the wrong way"?  Are there things you should have done better; should have done differently?

Stuart Hoegner: Absolutely.  Look, I think for people out there that are true sceptics, and I'm not talking about deniers, not haters that will never be convinced, I think one thing that we could have done better in the past, and we're getting better at now, is communications.  And, that's not a reflection on anyone.  Paolo's brilliant at this stuff, just like he is with everything else; he's a brilliant guy.  Joe Morgan is great, whom you know, and we have very capable defenders out there making our case for us.

But, we've been so focussed on building cool things that we have, and I've said this publicly, we have neglected our comms.  We have always known that we are a tech firm; we're not a law firm; we're not a PR shop; we're not a compliance shop, although compliance is very important.  And, you know, mea culpa, I want to be clear that I'm as guilty of this as anyone else, to the extent that I haven't prioritised public communications, and I have said, in the past, "Some of the FUD; it will just go away.  Let's not give it oxygen".  I was wrong about that, so you can blame me for that.

But, we are getting better at communicating with people; we're getting better at this.  We're learning; we'll continue to learn; and, we'll continue to improve and get the facts and evidence out there.

Peter McCormack: All right.  Let's talk about the NYAG case.  For those people who don't know, because it's quite complicated, how would you summarise the accusations?

Stuart Hoegner: So, let's start with some baseline information on NYAG.  First, there's no lawsuit or complaint that's been filed against Bitfinex or Tether in New York by the AG.  Second, this is not a criminal investigation.  Third, the Special Proceeding is only directed at getting information and keeping the injunction in order for the AG to conduct her investigation.

Now, Bitfinex and Tether have cooperated with the AG's office for over two years, and have produced approximately 2.5 million pages of materials.  While the AG's office originally obtained an injunction relating to Tether's reserves in April 2019, that injunction was substantially narrowed in the ensuing weeks and has not disrupted the day-to-day business of either Bitfinex or Tether.  And, the injunction and the order for information is what we've been referring to online when we speak about the 354 Order.

So, the injunction's set to expire, by its terms, on 15 January, which is the 15 January date that I referenced earlier that people have been talking about.  By that time the companies expect to have finished producing documents to the Attorney General.  So, we've seen a lot of FUD and fearmongering about 15 January, much of it by those who hate not just Tether, but the entire digital token ecosystem.

Despite those rumours and attacks, let me assure you that the business of Tether and Bitfinex will remain the same after 15 January.  I think our discussions with the AG are going well, I think they're constructive and we look forward to continuing that conversation with them.

Peter McCormack: But, what is it they're pursuing here particularly?

Stuart Hoegner: The original order had an injunction component enjoining us from doing certain things, which doesn't affect our day-to-day business at this time; and, it also sought information.  So, if you go through all of the requests that were in the original order from last April, they set out a series of things that they wanted, series of documents, information that they wanted from us.  We pushed back on that; we appealed the Supreme Court's ruling on that, the New York Supreme Court's ruling on that; we lost; we accept that; and, we've mediated our disputes as the Attorney General said, in their letter to the court, a few weeks ago.

So, again, they're looking for that information; we're in the course of providing that.  That's going to be done by the 15th and we're continuing to talk with them.

Peter McCormack: So, what happens after the 15th; what are the next steps in this, because two years is a long time?  I'm sure you want this wound up as quickly as possible; what are the next steps after that?

Stuart Hoegner: Time will tell.  Again, our discussions with them are constructive.  We are on track to give them everything they're looking for, and we'll see where it goes.

Peter McCormack: Okay.  I'm trying to understand what the various possible outcomes are from this and whether you can either talk about them?  Is there a scenario where Tether is wound up; is there a scenario where Tether is just fined; and, is there a scenario where actually they complete their investigation and there's no action to be taken?

Stuart Hoegner: Certainly.  They may complete their investigation and they may bring a complaint.  They may complete their investigation and think that there's nothing further to be done.  There may be some kind of settlement between the parties.  There are any number of things that could happen.

Peter McCormack: Right, okay.  What about the other lawsuits?  The other one I read about, there's the class action lawsuit regarding the traders; where are you at with that?  You applied to have that ended, right?

Stuart Hoegner: Yeah.  So, we have filed our motion to dismiss and the plaintiffs have given a reply in that; and we are waiting, at this point, to see if there's going to be oral argument on the motion.

Peter McCormack: Okay.  Just on the regulation side, it's quite an interesting time for, I'm going to say "crypto" and I hate that word, but crypto/Bitcoin/stablecoins; very interesting things have happened with the OCC recently.  It feels like there's more regulation coming, but some of it's quite open regulation that's actually allowing this industry to continue, but with a lot of oversight.

Specifically with regard to Tether, what are the regulations you have to follow; what are the agencies you have to work with?

Stuart Hoegner: Okay.  Tether is registered with FinCEN as a money services business, and that means that Tether has to make reports up to FinCEN; have a compliance programme, which I referred to earlier just in passing; subject to examination by FinCEN; that kind of thing.  Tether also makes reports to the BVI's Financial Investigation Agency under applicable law there, as most of the corps in the Tether Group are BVI companies.

So, the bottom line is that Tether is regulated.  So, this notion that you'll see sometimes that Tether is "unregulated", which is a big word in some mouths in my view, is just flat wrong and it's also a little bit irritating.  But, those are the baseline rules that Tether has to follow and our compliance programme has been built to match or exceed those standards.

Peter McCormack: So, what did you make of the OCC letter, because it was quite interesting, the idea that banks can start issuing stablecoins?  I imagine for someone like you guys, that's quite interesting, because could you see a scenario where they're working directly with Tether?

Stuart Hoegner: I think it's premature to say that.  I agree that the OCC letter was very interesting.  Other people far smarter than I am have talked about that and opined on it already, and I'll certainly defer to our US counsel on that.  But, it's very interesting and, look, we always are interested in working with and cooperating with and teaching and learning from regulators and policymakers and law enforcement agencies around the world, not just in the United States.  That's another step on that road.

I think you're right.  I think increased regulation in this space is coming.  I think it's going to be different depending on where it is.  We don't take US customers, but we are registered with FinCEN still, so that's something that we need to pay attention to, and we'll continue to engage on a worldwide basis with anyone who wants to work with us, to help develop their own policies, help develop their own regs and figure out what they can learn from us and what we can learn from them.

In that kind of context, we just think that other people are better qualified to do the last mile and we'll happy to cede the field to them.

Peter McCormack: Okay.  This might be a question back for you, Paolo, but are there scenarios where Tether can fail; any form of catastrophic failure?

Paolo Ardoino: I think that the only one that I'm, not worried about, but due to my technical nature, I'm working every single day and second of my life to prevent is ensuring that the private keys stay safe; that's it.  So, what we do is to choose the blockchains we allow Tether on in a really careful way.  So, we choose blockchains that are first of all, supported by a wide community; we choose blockchains that have native token support if possible; that have a built-in multisig pattern that we can use; and have support for hardware wallets.  So, these are basically the key requirements for us to operate safely on a specific blockchain.

We do have the ability of freezing accounts on most of the blockchains.  That is really important as we saved tens of billions of dollars.  Part of those were also, you know, some of these situations were public when we did that.  We recall one recent exchange hack, for example.  So, basically, my life is all about thinking how things can go wrong and making sure that we can prevent those from happening.

Peter McCormack: Which blockchains are you currently supporting?

Paolo Ardoino: We support, well, Bitcoin in two ways, I would say, from Omni Layer and Liquid.  Then, we support EOS, Ethereum, Tron, Algorand.  Don't do that face, please!

Peter McCormack: Fucking Tron!

Stuart Hoegner: On a podcast called What Bitcoin Did, you're going to get the grievance, Paolo!

Paolo Ardoino: Yeah, but he has to --

Stuart Hoegner: Yeah, I know, I know!

Peter McCormack: But, Tron?!  I mean, come on; Tron?

Paolo Ardoino: But, Ethereum fees were $16, mate.

Peter McCormack: But, Tron?!  Jesus!  All right, okay.  All right, so in fairness, you've answered all the questions that I wanted to ask you, and these were based on a lot of the questions that were coming out in the Twitter when I put it out there.  Most of them are related to, "Is it fully backed", etc.  I personally still think there's work to be done there, so I'm going to keep pushing you on that. 

Stuart, is there anything I've not asked that you kind of wish I had?

Stuart Hoegner: No, I don't think so, but I do want to just jump back to your comment.  I actually agree with you.  I think that there is work to be done.  I think you should continue to push us, and nothing is perfect; we can always do better and we look forward to doing better this year and beyond.  But, we're really excited about 2021 and we look forward to being pushed, we look forward to these questions, we look forward to engaging with the community and putting the facts out there on the table.

Peter McCormack: How comfortable would you be doing one in the future, give it a couple of months, and perhaps allow people to submit questions in and take the questions submitted in?

Stuart Hoegner: I'd have to talk to our PR folks, but personally I'm very comfortable with that; I'm fine with that.

Peter McCormack: I think we should do that.  Look, as I said at the start, and for full transparency, people should know that I'm in a legal situation and Tether have helped support that at some points, but at no point does that change the line of questioning.  I told you beforehand, I'm only doing this if I can ask any question I want; people should know that.

I wanted to do it because, whilst people say, "Oh, you're a journalist, Pete, you should be completely impartial", I think this is all FUD and I'm finding it really annoying.  And, I'm finding a consistent pattern in who it's coming from, and it's coming from people who've had an agenda against Bitcoin for a long time; and, it's coming from people who I think are nocoiners and they're salty.  I haven't found anyone I actually respect doing this.

So, I can be impartial at best with my questions, but I'm not impartial because I believe this is FUD, but I will continue to push you, I'll continue to ask you questions --

Stuart Hoegner: You should.

Peter McCormack: -- and I appreciate you coming on, man, and hopefully we'll do this again in a couple of months and if it's okay with you guys, I'll open up to the floor and see what questions people in the community have.