Original title: The Kill-or-Be-Killed Fight for Crypto’s Future
Author: Angus Berwick

Compiled by: Luffy, Foresight News

In the Alpine town of Lugano, Switzerland, global new billionaire Giancarlo Devasini lives a secluded life. He lives in a modest apartment by the lake, wears a black hoodie, and walks down the cobblestone streets, angry at an American competitor he believes is trying to destroy his business.

Devasini is one of the main owners of Tether, whose digital dollar USDT is an integral part of the cryptocurrency industry. USDT’s core position has helped Devasini accumulate huge wealth, wield huge influence in the crypto industry, and gain support from one of President Trump’s top allies.

Critics say the USDT has become the tool of choice for criminal gangs to move money around the world.

Jeremy Allaire, a powerful opponent trying to subvert Devasini’s business empire, founded Circle, Tether’s arch-enemy, issued a stablecoin called USDC. Allaire is an executive in a suit who can cope comfortably in Davos, Wall Street or the halls of Congress. He is launching a campaign to eliminate USDT through regulation.

Devasini has told business partners that Circle is slandering the USDT to politicians and inciting enforcement action against Tether. In Devasini’s view, Circle wants to turn the industry into another regulated corner of finance, and he wants cryptocurrencies to stick to their fearless, anti-traditional roots.

In 2014, Tether CEO Giancarlo Devasini was in Milan

“Circle will not win as long as the USDT is around,” Devasini told a partner a few months ago.

This battle is at stake for the future of the $3 trillion cryptocurrency industry. The pro-cryptocurrency Trump administration was supposed to usher in a golden age for the industry, and on Sunday Trump announced a cryptocurrency strategic reserve plan. But in fact, calls to bring cryptocurrencies into the mainstream through government regulation have triggered a life-and-death battle among cryptocurrency participants. Although the law is expected to be friendly to the crypto industry as a whole, it could be devastating for individual players like the USDT who are on the opposite side of the new rules.

Allaire has been encouraging governments in the United States and other countries to pass laws banning the use of USDT tokens issued abroad. One such EU law came into full effect in December last year, and a similar bill has been proposed in the United States.

USDT is a well-deserved industry leader, with four out of every five cryptocurrency transactions using its stablecoin. USDT Holdings, half of which Devasini owns, said it made $13 billion last year, twice that of BlackRock. The profits came mainly from its holdings of ultra-safe U.S. Treasury bonds, which are the value of USDT’s 1:1 pegging to the U.S. dollar.

Allaire has often testified before Congress calling for stricter regulation, which would come at the expense of USDT but would benefit Circle. Last year, a top Allaire deputy urged lawmakers to target the USDT, citing its use for terrorism financing. The Wall Street Journal reported in October last year that the U.S. Departments of Justice and the Treasury were investigating whether the USDT may have violated financial crimes laws.

“We hope to make USDC the preferred digital dollar,” Allaire said in an interview.

Jeremy Allaire, founder of cryptocurrency company Circle

In contrast, Devasini avoids the spotlight and almost never speaks in public. The 60-year-old, who has been USDT’s nominal chief financial officer, said on Monday that he would transfer to chairman. In fact, he has always been in charge of the company’s operations-even though the business card he issued said,”No title, no job, nothing.” Behind the scenes, according to colleagues, he is counting on allies like U.S. Commerce Secretary Howard Lutnick, whose company Cantor Fitzgerald holds large reserves of USDT Treasury bonds, to stifle hostile legislation backed by Circle. Lutnick resigned from his position at Cantor Fitzgerald after taking a cabinet position in the Trump administration in February this year.

Both companies declined to comment directly on each other. Allaire said Circle is not focusing on the “unregulated world of money,” but on the entire US$100 trillion legal digital currency market. In February, when a YouTube blogger in the cryptocurrency space asked Devasini’s deputy Paolo Ardoino about Circle, he grinned and replied: “You mentioned the name, but I didn’t.”

The USDT has repeatedly denied helping criminals and said it cooperates with law enforcement agencies.

Devasini is Italian and his career has been turbulent. He first worked as a plastic surgeon in Milan and later engaged in the electronics import business in Hong Kong. In 1995, Italian prosecutors charged him with fraud for participating in running a software piracy ring. Devasini reached a plea agreement with authorities and paid Microsoft a settlement.

Later, he approached the emerging cryptocurrency industry and spotted an opportunity about a decade ago. Cryptocurrency companies cannot connect their digital currencies to real-world banking systems.

Paolo Ardoino is one of Devasini’s main deputies and often appears in public on behalf of the USDT.

The USDT was launched in 2014 and registered in The British Virgin Islands to solve this problem. Traders can convert their real-world currencies into USDT pegged to the U.S. dollar and convert this stablecoin into other tokens almost instantly via blockchain.

In Devasini’s view, USDT aims to disrupt traditional finance. His wife, an artist, displayed paintings of George Washington screaming on a dollar bill that she believed the dollar “no longer had value.”

Allaire’s mission is different. The 53-year-old American is a veteran Silicon Valley entrepreneur who served as chief technology officer at software company Macromedia, which pioneered Flash animation technology. Allaire founded Circle in Boston a year before the USDT launch, hoping to create a new financial system for the Internet era that will improve the inefficient and complex banking networks that often cause problems with 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 of developing Circle by working with regulators is ironic and a “reverse bet.”

Taneja and other well-known U.S. investors, including venture capitalist Jim Breyer, known for his early investments in Facebook, have funded Allaire’s vision. Goldman Sachs, BlackRock and Fidelity, as well as cryptocurrency exchange Coinbase, all later invested. Allaire remains Circle’s largest individual shareholder.

When Allaire came to seek a money transmission license, regulators were skeptical. In this young, untested and rife industry, he quickly earned the reputation of “the most reliable adult in the room.” At the end of 2013, Allaire testified before Congress for the first time, calling on the United States to take the lead in setting up regulatory measures for cryptocurrencies to prevent criminal behavior.

“He is the best person I know when dealing with senior politicians in Washington,” Breyer said.

In 2020, when cryptocurrency trading went mainstream, Circle and USDT began to recriminations.

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 an option for those who want to bypass the financial system.

In letters to U.S. and other local authorities, Circle warned about the harm unregulated stablecoins could cause to consumers. In July of the same year, Circle pointed out to the Financial Stability Board, an international institution responsible for monitoring global finance, an incident that occurred two years ago, when authorities temporarily lost its peg to the U.S. dollar due to the seizure of a large number of USDTs during money laundering investigations. Circle said this suggests that such stablecoins could go wrong, wiping out consumers ‘cryptocurrency assets.

Circle promotes its transparency and released audited financial statements in 2021. Later, it hired Deloitte and Touche to review consolidated monthly statements covering U.S. dollar reserves, which consist mainly of U.S. Treasury bonds, as well as some short-term Treasury loans and cash.

In contrast, the financial statements released by the USDT are much more concise in detail and are only released at the mandatory request of New York State regulators. The USDT also includes bitcoin, commercial loans, gold and other unspecified investments to supplement its treasury bonds reserves.

Information reviewed by the Wall Street Journal showed Devasini complained to partners about unfair comparisons with Circle. He called USDC “junk money” and said auditors were reluctant to cooperate with USDT due to reputation issues, and claimed that someone was spreading rumors about his company online.

“Transfer to high-quality assets”

After years of flat returns, USDT and Circle unexpectedly received huge capital inflows in 2022. When the Fed raised interest rates, the USDT’s holdings of U.S. Treasury bonds surged from tens of millions of dollars a year to hundreds of millions of dollars a quarter.

A surveillance screen in Hong Kong shows the prices of various cryptocurrencies, including USDT and USDC

Devasini barely spent the windfall on himself. He often goes to meetings in tattered sportswear, a hat with the word “Fool” printed on it, and a string of keys and storage devices hung from a strap over his shoulder. Still, he likes to brag to his peers about how much USDT earns every day.

He also felt that his new wealth had made him a target. In December that year, at a conference in Bahamas, Devasini told a business partner that he believed the USDT posed a threat to the U.S. -led international banking order and that the White House could try to shut down the USDT at any time.

At the same time, Allaire is deepening its connections with the traditional financial world. By the end of 2022, Circle will deposit most of its reserves with Bank of New York Mellon, the world’s largest custodian bank, and some cash will be deposited with other regulated financial institutions. BlackRock manages its U.S. Treasury portfolio.

According to people familiar with USDT, the company is mainly managed by Devasini and a small group of people also from outside the industry, including the combative Italian computer programmer Ardoino. Circle has hundreds of employees and a board of former corporate executives.

As USDC gradually catches up with its competitors, Allaire tweeted a “shift to high-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 sold USDC, sending its price to 87 cents.

The USDT took the opportunity to rub salt on Circle’s wounds and publicize that it was not affected by the failure of Silicon Valley banks. As traders re-flocked to the USDT, Ardoino shot back on Twitter: “Move to safe assets.”

The USDC restored its peg to the U.S. dollar after regulators rescued Silicon Valley banks. About $20 billion flowed out of USDC for the rest of the year.

Ardoino warned that people should be “really wary” of stablecoin companies like Circle that place reserves in uninsured cash deposits, which he said makes the USDC vulnerable in the event of bank failures, despite the USDT’s seizure of funds a few years ago. Allaire said Circle needs to keep a small portion of its cash reserves outside Bank of New York Mellon and other major global banks to provide redemption services to customers.

In June of that 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 the USDT, calling for measures to ban the circulation of digital dollars issued overseas and “not complying with U.S. rules.” “The worst thing is that they are undermining U.S. national interests and security,” he said.

He and his deputies traveled around the world-Japan, Singapore, the European Union, Brazil-to advise other governments to enact stablecoin-related laws and sign up with foreign banking partners to allow local Circle customers to trade directly with regulated institutions.

Circle makes progress

At his home in Lugano last year, Devasini was disturbed by increasingly stringent legal restrictions stemming from both increasing regulatory measures and allegations that the USDT was used for criminal activities.

According to Michele Foletti, mayor of Lugano, this small Swiss town is his “safe haven” from the outside world. Devasini often works in a regular office above a sports bar and eats with Foletti at a restaurant that serves bitcoin-themed Italian bread. Devasini’s wife unveiled a sculpture of Bitcoin’s anonymous founder Satoshi Nakamoto in a park near the lake.

Devasini told his companions that he would not go to the United States. In a chat group, he asked about the fate of Kim Dotcom, founder of the defunct file-sharing site Megaupload, who the U.S. Department of Justice is trying to extradite him on piracy charges.

In April 2024, the U.S. Treasury Department specifically pointed out that the USDT was used to fund Russia’s war machine. In June, the slogan “USDT linked to corruption” appeared on billboards in Washington, D.C. and New York’s Times Square. It was part of an campaign launched by an advocacy group to draw attention to the use of USDT by terrorists and drug cartels. The group calls USDT the “next FTX.”

Devasini believes Circle is fueling this. “They are behind every attempt to discredit the USDT,” he told a business partner.

Ardoino later publicly accused USDT competitors of funding the advocacy group’s activities. The group, called Consumer Research, has launched campaigns against environmental, social and corporate governance investments in the past and said it never reveals the identity of its donors.

Circle declined to comment.

However, throughout 2024, Circle executives frequently met with senior U.S. Treasury officials and other authorities to point out national security risks to the USDT, according to people familiar with the discussions. In February, at a congressional hearing, when asked about the USDT, Circle’s senior policy director said she wanted U.S. authorities to study how the USDT facilitated “malicious activity.”

These people said that the U.S. Treasury Department is very concerned about the widespread use of USDT among enemies of the United States and is even considering whether to impose sanctions on the USDT itself. This would exclude USDT from the U.S. banking system and could lead to its demise. The Treasury Department also applied to Congress for new powers to crack down on dollar-backed offshore stablecoins, targeting the USDT, but these powers were not approved.

U.S. Sen. Kirsten Gillibrand, Democrat of New York, and Cynthia Lummis, Republican of 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 instead of USDT.”

Circle also received a license to operate in the European Union under new regulations, which require stablecoin issuers to hold at least 30% of their cash reserves in local banks. The USDT opposes this condition, arguing that it will increase risk, such as the failure of Silicon Valley banks. In response, Coinbase and other exchanges removed the USDT in the European Union.

Another victory for Circle was in December last year when Binance, the world’s largest cryptocurrency trading platform, partnered with it to promote the adoption of USDC. For years, this once-free exchange has been the center of USDT trading. But at the end of 2023, Binance also sided with Allaire after admitting to violating U.S. financial crimes laws.

new government

Devasini has a trump card in his hands: Commerce Secretary Lutnick, whose company Cantor Fitzgerald holds USDT’s treasury bonds.

Lutnick personally negotiated an agreement 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 might damage Tether. Devasini added that Lutnick didn’t like Circle either.

The Commerce Department did not respond to requests for comment. A spokesman for Cantor declined to comment.

People close to Lutnick said Lutnick helped Devasini connect with the Trump camp. A month after Trump’s victory, Tether spent $775 million to acquire a stake in the conservative streaming platform Rumble, with Cantor overseeing the deal. Rumble CEO Chris Pavlovski, a close friend of Donald Trump Jr., tweeted that Tether was spreading “American Freedom.”

In February, President Trump met with Howard Lutnick in his office, days later he was named Commerce Secretary.

At Lutnick’s appointment hearing, senators pressured him to clarify a possible conflict of interest with Tether. He claimed that criminals use Tether more than USDC simply because Tether has a larger market. “It’s like blaming Apple for criminals using Apple phones,” he said.

When Democratic Senator Maria Cantwell of Washington asked Lutnick whether he would undermine any bill regulating Tether, Lutnick replied that he had repeatedly expressed his belief that Congress should be careful not to undermine “dollar hegemony on blockchain,” which suggests that Congress should not enact legislation that is too onerous for companies like Tether to prevent them from losing market share.

He did not promise not to interfere with any federal investigation into Tether, except to write that he would perform his duties in accordance with government ethics laws. Regarding his previous discussions with Devasini, Lutnick wrote: “I have never hinted to anyone that I would do anything inappropriate to Tether.”

Trump issued an executive order aimed at promoting “legal dollar stablecoins around the world.” The order established a presidential cryptocurrency working group, which includes Lutnick, to review regulations that should be repealed or modified.

After Lutnick left Cantor, his son, Brandon Lutnick, who had an internship at Tether in Lugano, was appointed chairman of the company.

At the same time, Circle donated $1 million to super political action committees that support cryptocurrency-friendly candidates, and $1 million to Trump’s inaugural committee.

Senator Kirsten Gillibrand helped introduce a bill she said would allow formal cryptocurrency companies to compete on a level market.

In February, Lummis and Gillibrand joined two Republican senators to introduce a new stablecoin bill, which Allaire publicly welcomed and a similar proposal was introduced in the House. Gillibrand said in an interview that the legislation would allow formal cryptocurrency companies to compete on a fair market “without being disadvantaged or undermined by scammers without security standards and transparency.”

“I don’t think Tether meets the requirements yet,” she said.

Since the USDT was removed from some exchanges in mid-December, its growth has begun to slow.

Circle’s share price soared, and in early February the total value of USDC finally exceeded its pre-Silicon Valley Bank level. The company is about to move to its new headquarters in the World Trade Center in New York.

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