MUMBAI: Bitfinex was founded in 2012 and is one of the oldest cryptocurrency exchanges. It was the first trading platform to trade Bitcoin with funding.
Paolo Ardoino, Chief Technology Officer of Bitfinex, also CTO at Tether, the world’s first stablecoin, spoke to Mint about the wider place of stablecoin in the crypto ecosystem and the proposed ban on Bitcoin in India.
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Edited excerpts from the interview:
How is the supply of tether tokens (USDts) determined and what role does it play in the Bitcoin price boom?
Tether invented the concept of stablecoins in 2014. Tether tokens (USDts) are pegged one-to-one to the US dollar and are used by customers, trading platforms and exchanges around the world.
USDts can be used by traders in arbitrage. This means that traders can sell Bitcoin on one trading platform where the price is higher after buying it on another platform where the price is lower. To do this, you need to send Bitcoin to the platform where the price is higher and have a way to send something in return to the platform where the price is lower. Tether provides a way to send the other “leg” of the transaction as fast as the Bitcoin leg using blockchain technology. This speed can be critical for arbitrageurs. In a broader sense, tether offers a useful means of transferring value across the ecosystem.
The price of Bitcoin was recently driven by companies like Tesla or MicroStrategy, who are investing billions of dollars in the ecosystem. To buy bitcoin, these companies often rely on over-the-counter (OTC) desks and high frequency trading (HFT) companies. OTC desks buy USDts from Tether to buy bitcoin through multiple crypto exchanges for their institutional clients.
In order to receive and redeem USDts from Tether, an individual must first become a verified customer of Tether. This means completing the KYC process, identifying identity, business type, source of money and related items. After verification, the user must first deposit funds into Tether’s bank account. Tether will then credit the corresponding amount to Tether Tokens (USDt) to the Tether wallet address provided by the user.
Where do you see stable coins in the evolving crypto ecosystem?
Because of their innovative qualities and utility, stablecoins could play an important future role in the future of mainstream finance.
Central bank digital currencies (CBDCs) are also emerging as a new type of stablecoin. These can compete directly with private stable coins. CBDCs can be used as a better settlement and exchange network between banks. Nowadays, banks are using outdated technology to talk to each other, while blockchains and stablecoins are a much better technology that can be used to solve various problems banks are having today. Stablecoins have a bright future as both CBDCs and private interests issue their own digital tokens.
Do you see a bubble in Bitcoin prices?
That is for the market to decide, but we are not necessarily seeing a bubble at the time of writing. Bitcoin is a useful store of wealth and value and can be viewed as a hedge against inflation fears in fiat currencies. Bitcoin allows people to keep their wealth relatively private and secure.
Your views on the Indian market and the proposed ban on cryptos
Without trying to predict the future, the Indian market is definitely one of the fastest growing and most interesting markets for cryptocurrency. We understand that the Government of India is planning to limit the use of Bitcoin in India. Such a step would be extremely difficult to enforce, both legally and operationally. Accountability must always be balanced with financial privacy. This balance can be achieved in a market without an outright ban.
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