Original author: Rukawa Kaede
Original translation: Lyric, ChainCatcher
Author Zeke Faux, due to his strong interest in cryptocurrency, conducted in-depth research and investigation into Tether (USDT), and eventually wrote this book, which detailed the manipulation behind Tether and its impact on the crypto market. The main points of this article are mainly about Giancarlo Devasinis rise in the global crypto market through the operation of Tether stablecoin USDT. Although Tether initially promised to be backed by 1:1 US dollar reserves, it has been frequently questioned by regulators due to its opaque capital flow, frequent issuance, hacking incidents and mysterious capital operations, especially in Southeast Asia, where it has become a tool for illegal fund transfers. However, he is still promoting projects such as the Bitcoin Bond Program to continuously expand his business territory.
In January 2021, when COVID-19 swept the world and the crypto market was booming, this article will uncover the intricate financial operations and regulatory dilemmas behind the stablecoin Tether (USDT), including Tethers senior management and capital flows, especially the background and operating methods of Giancarlo Devasini, one of its actual controllers, presenting a little-known financial experiment.
The origin and development of Tether
The project was originally conceived by Brock Pierce and named Real Coin. Later, it joined hands with the offshore exchange Bitfinex to launch Tether in 2013, focusing on the stablecoin model with a 1:1 USD reserve. However, since its inception, Tether has been questioned for its operating model: in the absence of perfect global supervision, its capital flow and asset reserve issues have always been secretive and complicated. Tether not only provides key liquidity support for exchanges, but also plays the role of the last straw when the market is extremely volatile, but the bank relationship and fund management behind it are full of questions.
Giancarlo Devasini: From plastic surgeon to crypto tycoon
Giancarlo Devasini, the core figure of Tether, has a personal experience full of ups and downs. Born in Turin, Italy in 1964, Devasini worked in plastic surgery in his early years, and later switched to the field of electronic product import and software resale, and even involved in pirated software transactions. It is reported that he quickly rose in the business world with his adventurous spirit and unconventional business methods, with a net worth of about US$9.2 billion, and his wealth once surpassed the top executives of well-known luxury car companies.
Bitcoin: A Peer-to-Peer Electronic Cash System www.bitcoin.org
After reading the Bitcoin white paper, Devasini saw the huge potential of the crypto world, and subsequently invested in Bitfinex and gradually got involved in Tether’s business. Eventually, through acquisitions and strategic layout, he controlled about 40% of Tether’s equity. His background and operating methods laid the groundwork for Tether’s business model and risk control.
Operating in the Storm: Hackers, Banking Crisis and Funding Mysteries
In 2016, Bitfinex suffered the largest hacker attack in history, with about 119,800 bitcoins stolen, causing huge losses of assets. Faced with the crisis, Bitfinex took measures to deduct 36% of accounts and compensated users for losses by issuing debt tokens BFX. The investigation pointed out that in this incident, the intricate flow of funds between Tether and Bitfinex has raised greater doubts about the true reserve capacity of USDT.
At the same time, Tether also faces severe challenges in fund management. In 2017, the company deposited funds in several banks in Taiwan and other regions, but due to concerns about the crypto business among intermediary banks, many banks successively terminated cooperation, resulting in the funds being forced to stay. Even when the bank account was frozen and the flow of funds was blocked, Tether still issued a large amount of USDT on the Bitcoin Omni Layer, which further questioned the authenticity of its 1:1 reserve.
Court files and regulatory investigations show that Tether itself has admitted that it is unable to use the traditional banking system normally. The fund operation model behind it is more like a wealth game, using arbitrarily issued USDT to conduct large-scale asset allocation in the market, thereby manipulating the Bitcoin price to a certain extent.
Regulatory investigations and reserve fund turmoil
In 2019, the New York Attorney General found a large number of complementary fund operations between Bitfinex and Tether when investigating the fund transactions between the two. Bitfinex once quietly misappropriated Tethers reserves due to a gap in customer withdrawals, and Tethers official website immediately deleted the promise of 1:1 USD reserve support.
Tether’s website changes at the time raised new concerns about the company’s reserve policies
Since then, Tether has reached settlements and fines with New York State and the U.S. Commodity Futures Trading Commission, paying $18.5 million and $42.5 million respectively, highlighting that its operating model has always been on the edge of regulation.
In addition, reports show that Tether keeps about a quarter of its funds (about $15 billion) in Delta Trust Bank, and it is said to hold up to $113 billion in U.S. Treasury bonds. This series of operations not only provides Tether with flexibility in fund allocation, but also enables it to play a unique role in the global financial system.
Southeast Asian Market and Global Capital Flow
Globally, USDT has become the settlement basis for many trading platforms and DeFi protocols. Investigations have revealed that in Southeast Asia, USDT is widely used for illegal activities such as money laundering, fraud, drug trafficking and even human trafficking. Its convenient cross-border transfer feature provides criminals with a low-threshold tool for evading regulation. In the Taiwan market, the trading pair of USDT and the New Taiwan Dollar (TWD) is absolutely dominant, showing the irreplaceable position of stablecoins in global crypto asset transactions.
At the same time, despite a number of bankruptcies in the cryptocurrency circle, such as FTX, Celsius, BlockFi, etc., USDT has always maintained strong market liquidity and usage demand, consolidating its core position in the entire crypto ecosystem.
Capital operation and future layout
Amid the turbulent volatility in the crypto market, Giancarlo Devasini does not seem to be backing down from the storm. In November 2022, he appeared in El Salvador, took a photo with President Nayib Bukele, and was rumored to be planning a billion-dollar Bitcoin Bonds plan to further integrate global capital with the help of Bitcoin assets. This move not only demonstrates his confidence in the future of the market, but also exposes Tethers commercial ambition to obtain excess returns through diversified operations.
At the same time, Tethers special status in the global financial system and its delicate relationship with the US government have gradually surfaced. On the one hand, Tether provides financial support for the US government to maintain the circulation of US dollars in developing countries; on the other hand, its huge US Treasury bond positions are also regarded as important assets to support the US dollar system. It is this dual identity that has made Tether a focus of controversy and supervision by all parties while continuously expanding its market share.
Tether’s global impact and concerns
Tether and its operator Giancarlo Devasini play an important and controversial role in the global crypto market. From the initial 1:1 reserve commitment to the current complex and ever-changing fund operation model, Tether has not only challenged the boundaries of traditional financial regulation, but has also become, to some extent, an invisible promoter of the global dollar system. In this market full of high risks and high returns, Devasinis presence makes people wonder: Is he saving the entire industry, or is he just manipulating a huge and dangerous capital game to satisfy his personal greed?
In the future, how the crypto market will find a balance between regulation and innovation, and how Tether and USDT will get out of this gray area, remain difficult problems that the industry and regulatory authorities urgently need to solve.
This article expresses the views of the author Rukawa Kaede, does not represent the position of Chain Catcher, and is not intended as investment advice.
