Tether Co-Founder Dialogue: The Contest Behind Exiting Europe’s Market—Stablecoins Will Flourish Side by Side in the Future

Source: 《Milk Road Show》

Compiled by: Felix, PANews

William Quigley is the co-founder of Tether and WAX, and an early investor in crypto projects including Ethereum, Coinbase, and Kraken. Recently, he appeared on 《Milk Road Show》 to explain the reasons why Tether withdrew from the European market. He said that requirements in the EU MiCA bill regarding reserve fund ratios drove this business decision, and he compared it with Circle’s compliance strategy. The interview also discussed the potential role of tokenized fiat currencies and CBDCs in the future of finance, and he expressed investment interest in RWA tokenization and blockchain applications in the gaming sector.

Host: As the co-founder of Tether, I’d like to hear your thoughts on the recent developments in European digital asset regulation. In response to the EU’s MiCA law, companies like Tether and Binance have exited the EU market. How do you react to this? What impact will it have on Europe and the broader crypto future?

William: First, I want to say that, in an ideal world, Tether and other stablecoins should be usable anywhere in the world, no matter where you are, because tokenized fiat is a fantastic way to make payments and settle (especially for cross-border payments). But each jurisdiction wants to impose its own will on companies operating within it. As things stand, MiCA’s regulatory framework for stablecoins and crypto has been brewing for about five years. The first draft was already released around 2023, so we saw it coming.

But in Tether’s case, I believe the main reason Tether decided not to comply with MiCA and chose to exit is that, to meet MiCA requirements, Tether would have to completely rework the mathematical calculation and architecture of its reserves. Under MiCA, Tether would be required to store 60% of its reserves in banks in the EU. Under Tether’s current operating model, for a variety of reasons, that simply isn’t feasible.

Also, if the EU were Tether’s only market, maybe it would be willing to do so. But the reality is that most of Tether’s liquidity and trading happens outside the EU. In crypto, the importance of the EU has never been comparable to that of the United States or Asia. Therefore, for Tether, this ultimately becomes a purely economic business decision: comply with MiCA rules but significantly reduce its own economic benefits, or just exit directly? This involves a lot of details, and there are measures Tether could have taken. I believe EU crypto users would suffer a significant loss without Tether, but that doesn’t mean holding Tether is illegal. People can still self-custody; it’s just that regulated exchanges in the EU can no longer trade it. And when it comes to business decisions that can be reversed, there’s no need to worry too much—if in the future the EU’s share of crypto trading volume becomes huge, Tether can launch a stablecoin that meets MiCA standards at any time.

Host: Circle, which issues USDC and EURC, has taken another path. They complied with MiCA, set up a subsidiary in France, and it seems their market share and dominance in Europe are rising. How do you view this outcome?

William: Circle made this decision because it wants to establish itself in Europe, so it has to make some compromises. I remember that Circle’s subsidiary is set up in France, likely because it meets MiCA standards. I think EURC and Circle could end up taking 90% of the share in the liquidity pools that users can trade in.

But globally, compared with Tether, Circle has always been second place. Tether holds absolute dominance in many ways, and that’s not only reflected in market cap. If you look at trading pairs, almost every native crypto trading pair on earth has Tether as its main counterparty. So if you’re second—and a distant second—you’ll likely choose a way to expand by entering a market that a competing player doesn’t want to participate in for various reasons. That’s Circle’s logic. By operating under rules that comply with MiCA, they lose less, so they’re willing to do it.

There’s also another factor: nobody really wants the euro. The euro was touted as a competitor to the US dollar, but in the end it’s just a lame regional currency, usable in only more than 20 countries in the EU. If everyone globally wanted to hold tokenized euros, Tether would be happy to do it too—but that hasn’t happened.

Host: Many Americans strongly oppose central bank digital currencies (CBDCs), arguing that this gives central banks full control over people’s funds. Since Circle complies with these regulations, are they effectively becoming the US’s CBDC? If we move toward a centralized stablecoin system, what risks exist?

William: Circle can’t become the de facto CBDC. A few years ago, people thought it was inevitable that the US would roll out a CBDC, but it stalled, mainly due to public concerns. People fear that a centralized digital currency would give the government control over every transaction, and even freeze your bank account because of your political views. But I hope people understand the brutal reality: this has already been happening in our world for the past 15 years. After “9/11,” the US rushed through the USA PATRIOT Act, giving governments and financial institutions the ability to weaponize the financial system. People in the crypto industry know this best—many have simply lost their bank accounts just because they like crypto. The US government can access your bank records at any time without needing a court order. So I think the privacy rationale against CBDCs is very naive, because those so-called “negative effects” already exist in the world we have today. And the benefits it brings (the massive efficiency of tokenized fiat) far outweigh the negatives.

Host: You mentioned that the benefits of tokenized fiat outweigh the drawbacks. If the US’s Clarity Act were to pass, what huge release would it bring to the overall economy?

William: Most people don’t understand how complex today’s payment networks are. There are roughly 5,000 authorized money exchange entities worldwide, and each year they extract up to $1 trillion in “implicit taxes” through complicated currency exchange fees. The value of tokenized cash is enormous: it allows you to hold different currencies, use them on demand, and avoid being forced to convert and pay taxes. Once regulations are clear, the biggest impact will be that lots of companies will issue their own stablecoins. Any company that has hundreds of millions of consumers or large platform businesses—like Amazon, Apple, Google, Microsoft, or Alibaba—if it issues its own stablecoin, it can significantly reduce friction and costs. For example, Zuckerberg. He had been on the path to issuing coins, but when he was questioned by Congress, he backed off. I think he backed off because he didn’t know anything about it. He’s a great platform builder, but he understands very little about finance and payment functions. Back then, he was only obsessed with the “metaverse.” That might have been his biggest strategic mistake. Imagine a platform with 2.5 billion users enabling instant payments with almost zero cost and zero fraud risk. If used on platforms like WhatsApp, that would be an excellent business. Even if the metaverse loses money, the profits from stablecoins would be enough to cover it.

Host: Recently, about 140 US banks and financial institutions formed a collaborative organization (like the Open USD project) to launch interoperable stablecoins. In the future, will everyone have their own stablecoins that interoperate, or will companies like Tether and Circle continue to be widely used?

William: In my view, the stablecoins that will absolutely dominate in the future will be issued by those giant banks, giant financial institutions, and ultimately by central banks. The collaboration model among those 140 banks is very similar to how US banks jointly built the ACH payment network in the 1960s. It was a non-profit cooperative, serving simply as a clearing and settlement system that lets them transfer funds quickly at almost zero cost. And now, once there are stablecoins that everyone can use, the system will become even more efficient, faster, and less prone to fraud. There are a million different ways it could evolve.

Sometimes I sit down with my crypto friends and we discuss something that’s pretty interesting: in the future, will there be a single stablecoin that dominates like the dollar, or will there be thousands—even tens of thousands—of different stablecoins? Personally, I lean toward the latter. I think more people will hold different types of stablecoins rather than a single project monopolizing them. We’ll know in 10 years.

But private issuers like Tether and Circle will still have room to survive. I think their role is that they will be more willing to embrace new technology, because old and deeply entrenched financial institutions usually won’t. Large institutions choose to wait because they’re run by groups of high-salaried employees, so they fear taking the risk of doing something wrong. That’s why private stablecoin issuers have value. But if we’re talking about integrating stablecoins into the existing macro market of $100 trillion of GDP every year, then that business will be done by big banks, because large enterprises will continue to use the traditional payment rails operated by these big banks.

Maybe you’ll see some segments of specific users prefer to use privately issued stablecoins because they offer more features—but big institutions will certainly choose the traditional financial giants that provide them with underlying services. As for the banking alliance consisting of many important member institutions (like an OSD-type project), I speculate it will develop pretty well, because as I said, it has a highly successful historical reference to look at: the ACH network. The only issues they might need to handle would be potential antitrust concerns—so they must be openly accessible to any qualified member, just like the ACH network.

Host: If centralized entities issue digital assets, would that stimulate the market to demand more open, anti-censorship, permissionless assets like Bitcoin and Ethereum?

William: Actually, the biggest breakthrough born from blockchain technology is clearly “stablecoins”—Tether’s trading volume makes Bitcoin look small in comparison. But there’s a very strong reason why permissionless tokens (like DeFi projects and non-stablecoin tokens) exist: innovation. In DeFi, you can accomplish many things that traditional finance can’t even imagine, and the code is fully public. Those innovations might take years—if they ever happen at all—to come to fruition on highly regulated or closed chains like JPMorgan or Robinhood. So they won’t disappear. Whether they can continue to capture and keep a large market depends on the specific use cases.

Host: At the current stage of the market, what investment area excites you most?

William: I’ve always been very interested in video games, and that’s also why I founded WAX, so players can freely trade virtual items without being restricted by issuers. But so far, most blockchain games have only been for speculation and trading coins, without truly improving the entertainment value of games. What excites me most right now is tokenized RWA. Traditional finance trading of assets is extremely clunky right now, and it requires a lot of intermediaries to ensure ownership is legal and real. Using blockchain to trade RWA has very strong business logic, and that’s where I’m spending a lot of my time. You mentioned my skepticism about AI valuations. Yes, people can clearly see the value AI brings, but that alone isn’t enough to build business models that can capture that value. Sam Altman compared AI to “utility,” but because it’s heavily regulated and has huge capital expenditures, utility ends up being very boring and inflexible as an investment. Right now, large companies are pouring hundreds of billions, even trillions of dollars, in capital expenditures into AI, and I’m very skeptical about how they’re going to recoup it. Also, personally, I doubt whether large language models (LLMs) are truly the final form that AI will take. If companies can’t figure out how to reward investors for the capital they put in, then they’re not really worth anything. For reasons similar to those—high capital intensity and lack of a moat—I’m also skeptical about space businesses over the next 25 years.

Further reading: Interpreting Stablecoin’s New Growth Logic from Binance Reports: Store of Value, Payment Tools, and On-Chain Finance