WSJ Tech News Briefing: Two Titans Battle for Crypto’s Future
Episode: Two Titans Battle for Crypto’s Future
Release Date: March 11, 2025
Host: Charlotte Gartenberg
Reporter: Angus Baric
Podcast: WSJ Tech News Briefing
Description: This episode delves into the intense rivalry between two leading stablecoin companies, Tether and Circle, exploring their founders, business strategies, regulatory challenges, and the broader implications for the cryptocurrency industry.
1. Introduction to the Crypto Battle
Charlotte Gartenberg opens the episode by highlighting a significant development in the cryptocurrency landscape: the executive order signed by President Trump establishing a strategic bitcoin reserve and a stockpile for other cryptocurrencies. This move aims to mainstream crypto through government regulation, intensifying the rivalry between Giancarlo Devasini of Tether and Jeremy Allaire of Circle. The stage is set for a high-stakes battle in the $3 trillion crypto industry, not just for dominance but also for survival.
2. Giancarlo Devasini and Tether
Angus Baric provides an in-depth look into Giancarlo Devasini, the enigmatic Italian billionaire behind Tether. Devasini has been steering Tether since its inception over a decade ago, maintaining a low public profile. Despite the lack of public appearances, his influence is undeniable. Tether reported earnings of over $13 billion last year, surpassing even financial giant BlackRock.
“He’s immensely wealthy, extremely secretive, and he’s very focused on preserving this incredibly kind of lucrative business as the industry heads into this new regulatory world.”
— Angus Baric [01:28]
Tether's Role in Crypto:
Tether was created to address the challenges crypto traders faced with traditional banking systems, offering a stablecoin pegged to the US Dollar. This innovation allowed for seamless and cost-effective transactions, solidifying Tether as a foundational element in the crypto ecosystem. With approximately 80% of crypto transactions involving Tether, its influence is monumental.
“About four out of every five crypto transactions involves tether. Its volumes are immense. We're talking $100 billion sometimes every day.”
— Angus Baric [04:24]
Controversies Surrounding Tether:
Despite its utility, Tether has faced allegations of facilitating criminal activities. The Treasury Department cited Tether in funding the Russian war machine, and it has been used by various sanctioned entities and criminal organizations to move money covertly.
“They would effectively work as the sort of central bank of crypto... It has a lot of legitimate use cases, but there's a huge amount of kind of criminal use as well.”
— Angus Baric [02:27]
Tether maintains that it cooperates with law enforcement and is committed to compliance but acknowledges the vast secondary market operates beyond its direct oversight.
“Tether say that they cooperate with law enforcement agencies and that they're committed to compliance.”
— Angus Baric [03:58]
3. Jeremy Allaire and Circle
Turning to the American side of the rivalry, Jeremy Allaire, the CEO of Circle, is portrayed as a seasoned Silicon Valley entrepreneur with strong ties to venture capitalists and Wall Street. Allaire envisions Circle as a platform to revolutionize cross-border transactions, making them faster and more cost-effective.
“He wants to create a financial system for the Internet age.”
— Angus Baric [05:55]
USD Coin (USDC):
Circle's flagship product, USD Coin (USDC), is a stablecoin pegged to the US Dollar, backed by $1 in cash or cash-equivalent assets for every USDC issued. With a market value of around $60 billion, USDC is positioned as a reliable digital dollar for blockchain transactions and currency exchanges.
“For every USDC which Circle issues they say that there is $1 in a kind of cash equivalent asset backing that.”
— Angus Baric [06:00]
Challenges Faced by Circle:
Circle has encountered setbacks, notably when the collapse of Silicon Valley Bank in March 2023 led to the loss of $3 billion in Circle's cash reserves, causing USD Coin to dip to $0.87. This incident highlighted vulnerabilities in Circle's reserve management compared to Tether's more extensive reserves.
“They weren't looking to exploit the gaps global regulation, they weren't based offshore. They've always been in the US USD.”
— Angus Baric [05:55]
In response to the bank failure, Circle asserts that maintaining reserves in smaller banks is necessary for customer transactions, while the majority of their reserves remain securely held in Treasuries and with the Bank of New York Mellon.
“They say that the vast majority of their reserves are held in Treasuries and are stored at the Bank of New York Mellon.”
— Angus Baric [08:34]
4. The Rivalry: Tether vs. Circle
The competition between Tether and Circle is not merely about market share but also represents a clash of philosophies regarding the future of cryptocurrency.
Public Disputes:
Both founders have publicly criticized each other's business practices. Circle has questioned Tether's transparency, particularly regarding its reserve composition, which includes assets beyond cash equivalents, such as Bitcoin and gold.
“Circles often kind of flagged Tether's opacity, how Tether's reserves aren't solely based on kind of cash on cash equivalents.”
— Angus Baric [07:26]
Conversely, Tether has criticized Circle's decision to hold a portion of its reserves in Silicon Valley Bank, arguing that it exposed them to unnecessary risk during the bank's collapse.
“I think so Tether have said that Circle was kind of mistaken to leave their cash in a bank because that then leaves them vulnerable to a bank failure.”
— Angus Baric [07:26]
Strategic Differences:
At the heart of the rivalry is a fundamental disagreement on regulatory engagement. Allaire advocates for integrating crypto into the regulated financial system, working closely with authorities to ensure compliance and stability. In contrast, Devasini aims to preserve crypto's anti-establishment essence, resisting heavy-handed regulation to maintain its decentralized and autonomous nature.
“The core of their rivalry in Devasini's eyes... is turn crypto into effectively just another corner of the regulated financial system, whereas Devasini wants crypto to remain true to its anti-establishment roots.”
— Angus Baric [08:56]
Existential Stakes:
Devasini has publicly stated that Tether's survival is crucial for Circle's success, intensifying the battle with high-stakes rhetoric.
“The only way that Circle will win this fight is if Tether dies.”
— Angus Baric [08:56]
5. Implications for the Crypto Industry and Investors
The ongoing feud between Tether and Circle significantly impacts the broader cryptocurrency ecosystem. This battle is twofold: it concerns the lucrative revenue generated by stablecoins and the foundational direction of the entire crypto industry.
Economic Impact:
Stablecoin companies like Tether and Circle are major profit centers in crypto, leveraging vast reserves in low-risk assets like US Treasuries to earn significant returns. The outcome of their rivalry could reshape the financial landscape of crypto, influencing market stability and investor confidence.
“Both these stablecoin companies, they're making huge profits doing something which is currently fairly risk free.”
— Angus Baric [09:38]
Future of Crypto Regulation:
The clash also symbolizes the divergent paths within the crypto world: regulatory integration versus decentralized autonomy. The leader who successfully navigates the regulatory environment while maintaining market dominance could set the standard for future crypto operations and governance.
“It's also this fight for the future of the industry... whether it's going to continue to be led by companies that fundamentally view very skeptical of government and of regulations and would much prefer to be left alone.”
— Angus Baric [09:38]
Investor Considerations:
For investors, the rivalry highlights the importance of understanding the regulatory landscape and the operational transparency of stablecoin providers. The stability and trustworthiness of these digital assets are pivotal for long-term investment viability and market health.
6. Conclusion
The episode of WSJ Tech News Briefing sheds light on a pivotal moment in the cryptocurrency sector, where two dominant players, Tether and Circle, are not only competing for market supremacy but also shaping the future trajectory of the entire industry. As regulatory pressures mount and the demand for transparency and stability increases, the outcome of this rivalry will have lasting repercussions for businesses, investors, and the global financial system.
“It's a fight for that pretty big slice of the pie... and also this fight for the future of the industry.”
— Angus Baric [09:38]
Produced by: Jess Jupiter, Julie Chang
Supervising Producer: Kathryn Millsop
Host: Charlotte Gartenberg
For those who missed the episode, this summary encapsulates the key discussions between Charlotte Gartenberg and Angus Baric, providing a comprehensive overview of the rivalry between Tether and Circle and its implications for the cryptocurrency world.