Original author: Angus Berwick
Original translation: Luffy, Foresight News
In the Alpine town of Lugano, Switzerland, Giancarlo Devasini, one of the worlds newest billionaires, lives a reclusive life. He lives in a modest apartment by the lake, walks the cobblestone streets in a black hoodie, and is furious with an American competitor who he believes is trying to destroy his business.
Devasini is one of the main owners of Tether, a company that issues digital dollars that are integral to the cryptocurrency industry. USDT’s centrality has helped Devasini amass a vast fortune, enormous influence in the crypto industry, and the support of one of President Trump’s top allies.
Critics say USDT has become the tool of choice for criminal gangs to move money around the world.
One powerful rival trying to upend Devasini’s business empire is Jeremy Allaire, whose Circle is Tether’s arch-nemesis and issues a stablecoin called USDC. Allaire, a suit-wearing executive who is at home in Davos, Wall Street and the halls of Congress, is launching a campaign to eliminate USDT through regulation.
Devasini has told business partners that Circle is discrediting USDT to politicians and inciting enforcement action against Tether. To Devasini, Circle wants to turn the industry into just another regulated corner of finance, while he wants crypto to stay true to its bold, iconoclastic roots.
Tether CEO Giancarlo Devasini in Milan in 2014
A few months ago, Devasini told a partner: “As long as USDT is still there, Circle will not win.”
The fight is about the future of the $3 trillion cryptocurrency industry. The pro-crypto Trump administration was supposed to kick off a golden age for the industry, with Trump announcing a strategic cryptocurrency reserve on Sunday. But in reality, calls to bring cryptocurrencies into the mainstream through government regulation have sparked a life-and-death battle among cryptocurrency players. While the law is expected to be crypto-friendly overall, it could be devastating for individual players like USDT that stand on the wrong side of the new rules.
Allaire has been encouraging governments in the U.S. and other countries to pass laws that would ban the use of USDT tokens issued outside of their borders. One such law in the European Union came into full effect in December, and a similar bill has been proposed in the U.S.
USDT is the undisputed industry leader, with its stablecoin used in four out of every five cryptocurrency transactions. USDT Holdings, in which Devasini holds a half stake, said it made $13 billion in profit last year, twice as much as BlackRock, with profits largely coming from its large holdings of ultra-safe U.S. Treasuries, which underpin the value of USDT, which is pegged 1:1 to the dollar.
Allaire has frequently testified before Congress, calling for stricter regulation that would come at the expense of USDT but benefit Circle. Last year, one of Allaire’s top deputies urged lawmakers to target USDT, citing its use for terrorist financing. The Wall Street Journal reported in October that the U.S. Department of Justice and the Treasury Department were investigating whether USDT might have violated financial crime laws.
“We want to make USDC the digital dollar of choice,” Allaire said in an interview.
Jeremy Allaire, founder of cryptocurrency company Circle
Devasini, by contrast, shuns the spotlight and rarely speaks publicly. The 60-year-old has been USDT’s nominal chief financial officer, and on Monday the company said he would transition to chairman. In practice, he has been running the company — even though his business cards say “No Title, No Job, Nothing.” Behind the scenes, he has been pinning his hopes on allies like U.S. Commerce Secretary Howard Lutnick, whose firm Cantor Fitzgerald holds a large reserve of USDT Treasury bonds, to kill hostile legislation backed by Circle, according to colleagues. Lutnick resigned from Cantor Fitzgerald after being offered a cabinet position in the Trump administration in February.
Both companies declined to comment directly on the other. Allaire said Circle is not focused on the “unregulated world of money” but on the entire $100 trillion legal digital currency market. In February, when a cryptocurrency YouTuber asked Paolo Ardoino, Devasini’s deputy, about Circle, he grinned and replied, “You mentioned that name, I didn’t.”
USDT has repeatedly denied helping criminals and said it cooperates with law enforcement agencies.
Make the dollar scream
Devasini, an Italian who had an eventful career, started out as a plastic surgeon in Milan and ended up importing electronics in Hong Kong. In 1995, Italian prosecutors charged him with fraud for running a software piracy ring. Devasini reached a plea agreement with authorities and paid a settlement to Microsoft.
He later got involved with the nascent cryptocurrency industry and saw an opportunity about a decade ago: Cryptocurrency companies were having trouble connecting their digital currencies to the real-world banking system.
Paolo Ardoino is one of Devasini’s main deputies and often appears in public on behalf of USDT
USDT, launched in 2014 and registered in the British Virgin Islands, was designed to solve this problem. Traders can exchange their real-world currencies for USDT, which is pegged to the U.S. dollar, and convert this stablecoin into other tokens almost instantly through the blockchain.
In Devasinis view, USDT is designed to subvert traditional finance. His wife is an artist, and she exhibited a painting in which George Washington on the dollar bill was screaming. She believes that the dollar is no longer valuable.
Allaire’s mission is different. The 53-year-old American is a veteran Silicon Valley entrepreneur who served as CTO at software company Macromedia, which pioneered Flash animation technology. Allaire founded Circle in Boston a year before USDT launched, hoping to create a new financial system for the Internet age to improve the inefficient and convoluted banking networks that often cause problems for international payments.
Hemant Taneja, CEO of venture capital firm General Catalyst, said that while most members of the cryptocurrency community prefer unregulated markets, Allaire’s strategy to grow Circle by working with regulators is ironically a “contrarian bet.”
Taneja and other prominent U.S. investors, including venture capitalist Jim Breyer, known for his early investment in Facebook, have pledged to support Allaire’s vision. Goldman Sachs, BlackRock and Fidelity, as well as cryptocurrency exchange Coinbase, have also invested. Allaire remains Circle’s largest individual shareholder.
When Allaire went to the door seeking a money transmission license, regulators were skeptical. In a young, untested industry rife with scammers, he quickly earned a reputation as the most reliable adult in the room. In late 2013, Allaire testified before Congress for the first time, calling on the United States to take the lead in setting regulations for cryptocurrencies to prevent criminal behavior.
“He’s the best person I know at dealing with senior politicians in Washington,” Breyer said.
In 2020, as cryptocurrency trading went mainstream, Circle and USDT began to accuse each other.
In January of that year, Allaire wrote on Twitter: The biggest feature of USDT is its non-compliance and opacity. He pointed out that USDT has become the choice of those who want to bypass the financial system.
In letters to authorities in the U.S. and elsewhere, Circle warned of the harm that unregulated stablecoins could do to consumers. In July of the same year, Circle pointed out to the Financial Stability Board, an international body responsible for monitoring global finance, an incident two years ago when USDT temporarily lost its peg to the U.S. dollar after authorities seized a large amount of it in a money laundering investigation. Circle said this showed that such stablecoins could have problems, wiping out consumers cryptocurrency assets.
Circle touts its transparency and published audited financial statements in 2021. It later hired Deloitte to review consolidated monthly statements covering its dollar reserves, which are primarily made up of U.S. Treasuries, but also include some short-term Treasury loans and cash.
In contrast, the financial statements released by USDT are much more sparse in detail and were released only at the behest of New York state regulators. USDT also includes Bitcoin, commercial loans, gold and other unspecified investments in addition to its treasury reserves.
Devasini complained to partners about unfair comparisons with Circle, according to messages reviewed by the Journal. He called USDC a “shitcoin,” said auditors were reluctant to work with USDT because of its reputation, and claimed that someone was spreading rumors about his company online.
Shift to high-quality assets
After years of lackluster returns, USDT and Circle received unexpectedly large inflows in 2022. When the Federal Reserve raised interest rates, the income from USDTs holdings of U.S. Treasuries surged from tens of millions of dollars a year to hundreds of millions of dollars a quarter.
A surveillance screen in Hong Kong displays the prices of various cryptocurrencies, including USDT and USDC.
Devasini spent little of the windfall on himself. He often went to meetings in a tattered tracksuit and a hat with the word dumb printed on it, with a bunch of keys and storage devices hanging from a shoulder strap. Still, he liked to brag to his peers about how much USDT he was bringing in every day.
He also felt that his newfound wealth made him a target. At a meeting in the Bahamas that December, Devasini told a business partner that he believed USDT posed a threat to the U.S.-led international banking order and that the White House could try to shut it down at any time.
At the same time, Allaire is deepening its ties to the traditional financial world. Circle will hold most of its reserves at Bank of New York Mellon, the world’s largest custodian bank, through the end of 2022, with some cash held at other regulated financial institutions. BlackRock manages its U.S. Treasury portfolio.
People familiar with USDT say the company is run primarily by Devasini and a small group of outsiders, including Ardoino, a combative Italian computer programmer. Circle has hundreds of employees and a board of former corporate executives.
As USDC gradually catches up with its competitors, Allaire tweeted Moving to quality assets, suggesting that traders are abandoning USDT and choosing USDC.
But when Silicon Valley Bank collapsed in March 2023, Circle was in trouble, with more than $3 billion in cash reserves trapped. Panicked traders dumped USDC, sending its price down to 87 cents.
USDT took the opportunity to rub salt in Circle’s wounds, claiming that it was not affected by the collapse of Silicon Valley Bank. As traders rushed back into USDT, Ardoino tweeted: “Move to safe assets.”
After regulators bailed out Silicon Valley Bank, USDC restored its peg to the dollar. During the rest of the year, about $20 billion flowed out of USDC.
Ardoino warned that people should be “really wary” of stablecoin companies like Circle that keep their reserves in uninsured cash deposits, saying that makes USDC vulnerable to bank failures, although USDT also had funds seized a few years ago. Allaire said Circle needs to keep a small portion of cash reserves outside of BNY Mellon and other major global banks to provide redemptions for customers.
In June of the same year, Allaire petitioned Congress to pass a stablecoin bill that would impose strict reserve requirements and allow issuers to hold cash at the Federal Reserve. He launched a fierce attack on USDT, calling for measures to ban the circulation of digital dollars issued overseas and not complying with US rules. He said: The worst thing is that they are undermining the national interests and security of the United States.
He and his deputies have traveled around the world — to Japan, Singapore, the European Union, Brazil — advising other governments to enact stablecoin laws and signing up foreign banking partners to enable local Circle customers to trade directly with regulated institutions.
Circle makes progress
Last year, at home in Lugano, Devasini grew uneasy about growing legal restrictions stemming from both increasing regulatory measures and allegations that USDT was being used for criminal activity.
Lugano’s mayor, Michele Foletti, called the Swiss city his “safe haven” from the outside world. Devasini often worked in a modest office above a sports bar and dined with Foletti at a restaurant that served Bitcoin-themed Italian bread. Devasini’s wife unveiled a sculpture of Satoshi Nakamoto, the anonymous creator of Bitcoin, in a park by the lake.
Devasini told his peers he wasnt going to the U.S. In one chat group, he asked about the fate of Kim Dotcom, the founder of the defunct file-sharing site Megaupload, whom the U.S. Justice Department was trying to extradite on piracy charges.
In April 2024, the U.S. Treasury Department specifically pointed out that USDT was used to finance Russias war machine. In June, the slogan USDT linked to corruption appeared on billboards in Washington, DC and Times Square in New York. This is part of a campaign launched by an advocacy group to draw attention to the use of USDT by terrorists and drug cartels. The group called USDT the next FTX.
Devasini believes that Circle is behind this. He told a business partner: They are behind every attempt to discredit USDT.
Ardoino later publicly accused USDT competitors of funding the advocacy group’s activities. The group, Consumer Research, has in the past campaigned against environmental, social and corporate governance investments and says it never reveals the identities of its donors.
Circle declined to comment.
However, according to people familiar with the discussions, Circle executives met frequently with senior U.S. Treasury officials and other authorities throughout 2024 to point out the national security risks posed by USDT. In February of this year, when asked about USDT at a congressional hearing, Circle’s senior policy director said she hoped U.S. authorities would study how USDT facilitated malicious activity.
These people said that the U.S. Treasury Department is very concerned about the widespread use of USDT among Americas enemies and is even considering whether to impose sanctions on USDT itself. This will exclude USDT from the U.S. banking system and may very well lead to the demise of its business. The Treasury Department has also applied to Congress for new powers to crack down on foreign stablecoins backed by the U.S. dollar, targeting USDT, but these powers have not been approved.
U.S. Senators Kirsten Gillibrand, a Democrat from New York, and Cynthia Lummis, a Republican from Wyoming, introduced a bill in April that would ban unregulated stablecoins. Lummis said at the time: “If I had to choose, I would choose USDC over USDT.”
US Senator Cynthia Lummis Introduces Bill to Regulate Cryptocurrencies
Circle also received a license to operate in the European Union under new regulations that require stablecoin issuers to hold at least 30% of their cash reserves in local banks. USDT opposed this condition, arguing that it would increase risks, as exemplified by the collapse of Silicon Valley Bank. In response, Coinbase and other exchanges removed USDT from the EU.
Another win for Circle came in December when Binance, the world’s largest cryptocurrency exchange, partnered with it to promote the use of USDC. The once freewheeling exchange had been a hub for USDT trading for years. But in late 2023, Binance also sided with Allaire after it admitted to violating U.S. financial crime laws.
New Government
Devasini has an ace up his sleeve: Commerce Secretary Lutnick, whose firm Cantor Fitzgerald holds Treasury reserves in USDT.
Lutnick had personally negotiated a deal for Cantor to invest in Tether’s holding company through convertible bonds in April 2024. After meeting with Lutnick in Lugano the following month, Devasini told colleagues that Trump’s allies would seek to veto any bill that could harm Tether. Devasini added that Lutnick also disliked Circle.
The Commerce Department did not respond to a request for comment. A Cantor spokesman declined to comment.
People close to Lutnick say he helped connect Devasini to the Trump campaign. A month after Trump’s victory, Tether spent $775 million to buy a stake in conservative streaming platform Rumble, a deal Cantor oversaw. Rumble CEO Chris Pavlovski, a close friend of Donald Trump Jr., tweeted that Tether was spreading “American freedom.”
President Trump met with Howard Lutnick in his office in February, days before he was named Commerce Secretary.
During Lutnick’s confirmation hearing, senators pressed him about possible conflicts of interest posed by Tether. He claimed that criminals use Tether more than USDC simply because the market for Tether is larger. “That’s like blaming Apple because criminals use iPhones,” he said.
When asked by Sen. Maria Cantwell, D-Wash., whether Lutnick would derail any bill regulating Tether, Lutnick responded that he has repeatedly expressed his belief that Congress should be careful not to undermine “dollar hegemony on the blockchain,” suggesting that Congress should not enact legislation that is too burdensome for companies like Tether, lest they lose market share.
He stopped short of promising not to interfere in any federal investigation of Tether, writing only that he would perform his duties in accordance with government ethics laws. Regarding his previous discussions with Devasini, Lutnick wrote: “I have never suggested to anyone that I would do anything inappropriate with respect to Tether.”
Trump issued an executive order to promote a legal dollar stablecoin around the world. The order established a presidential cryptocurrency task force, which includes Lutnick, to review regulations that should be repealed or modified.
After Lutnick left Cantor, his son Brandon Lutnick, who had interned at Tether in Lugano, was named chairman of the firm.
Meanwhile, Circle donated $1 million to super PACs supporting crypto-friendly candidates and $1 million to Trump’s inaugural committee.
Senator Kirsten Gillibrand helped introduce a bill she said would allow legitimate cryptocurrency companies to compete in a fair market.
In February, Lummis and Gillibrand, along with two Republican senators, introduced a new stablecoin bill, which Allaire publicly welcomed, as well as a similar proposal in the House of Representatives. Gillibrand said in an interview that the legislation would allow legitimate cryptocurrency companies to compete in a fair market “without being disadvantaged or undermined by scammers who have no security standards and transparency.”
“I don’t think Tether meets the requirements yet,” she said.
Since USDT was delisted from some exchanges in mid-December, its growth has slowed.
Circles stock price has been soaring, and in early February the total value of USDC finally exceeded the level before the Silicon Valley Bank incident. The company is about to move into its new headquarters in the World Trade Center in New York.
