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

Original Translation: Luffy, Foresight News

In the Alpine town of Lugano in Switzerland, global newly-minted billionaire Giancarlo Devasini leads a reclusive life. He resides in a modest lakeside apartment, donning a black hoodie, strolling the cobbled streets, burning with anger toward his American rival whom he believes is out to sabotage his business.

Devasini is one of the main owners of Tether, whose issued digital dollar USDT is an essential part of the cryptocurrency industry. The central role of USDT has helped Devasini amass a huge fortune, gain significant influence in the crypto industry, and secure support from a top ally of President Trump.

Critics claim that USDT has become the preferred tool for criminal syndicates to transfer funds globally.

A powerful adversary seeking to disrupt Devasini's business empire is Jeremy Allaire, whose founded company Circle is Tether's archenemy, issuing a stablecoin called USDC. Allaire, a suit-clad executive, is at ease whether in Davos, Wall Street, or the halls of Congress. He is spearheading a movement aiming to eliminate USDT through regulation.

Devasini has told business associates that Circle is lobbying politicians to smear USDT and incite enforcement actions against Tether. To Devasini, Circle aims to turn this industry into another regulated corner of the financial realm, while he hopes cryptocurrency can uphold its bold, defiant, and anti-establishment roots.

In 2014, Tether CEO Giancarlo Devasini in Milan

A few months ago, Devasini told a partner, "As long as USDT exists, Circle won't win."

This battle concerns the future of the $3 trillion cryptocurrency industry. The Trump administration, which supports cryptocurrency, was supposed to usher in a golden age for the industry. On Sunday, Trump announced the Strategic Reserve Cryptocurrency Plan. However, the push to mainstream cryptocurrency through government regulation has sparked a life-or-death struggle among cryptocurrency participants. Although the laws are expected to be generally friendly to the crypto industry, it could be devastating for individual participants like USDT, who stand in opposition to the new rules.

Allaire has long been advocating for the U.S. and other governments to enact legislation banning the use of USDT tokens issued abroad. A similar law in the EU took full effect last December, and the U.S. has also proposed a similar bill.

USDT is undeniably an industry leader, with its stablecoin being used in four out of every five cryptocurrency transactions. The holding company of USDT, in which Devasini holds half of the shares, reported a $13 billion profit last year, doubling that of BlackRock. The profit mainly came from its substantial holdings of ultra-safe U.S. Treasury bonds, which provide value support for USDT pegged 1:1 to the U.S. dollar.

Allaire regularly testifies before Congress, calling for stricter regulation that would come at the expense of USDT but benefit Circle. Last year, a senior aide of Allaire pointed to the use of USDT in terrorist financing and urged lawmakers to target USDT. The Wall Street Journal reported last October that the U.S. Department of Justice and Treasury Department are investigating whether USDT may have violated anti-money laundering laws.

Allaire stated in an interview, "We want USDC to become the preferred digital dollar."

Cryptocurrency company Circle's founder Jeremy Allaire

In contrast, Devasini avoids the limelight and hardly ever speaks in public. The 60-year-old has nominally been the CFO of USDT and on Monday, the company announced that he will assume the role of chairman. In reality, he has always been in control of the company's operations—despite his business card stating "No Title, No Job, Nothing." According to colleagues, behind the scenes, he looks to allies like U.S. Commerce Secretary Howard Lutnick to stifle hostile legislation supported by Circle, as Lutnick's company Cantor Fitzgerald holds a significant amount of USDT Treasury reserves. Lutnick resigned from his position at Cantor Fitzgerald after joining the Trump administration cabinet in February this year.

Both companies declined to comment directly on each other. Allaire stated that Circle is not focused on the "unregulated currency world" but on the entire legitimate $100 trillion digital currency market. In February this year, when a cryptocurrency YouTuber asked Devasini's deputy Paolo Ardoino about Circle, he chuckled and replied, "It's you who mentioned that name, not me."

USDT has repeatedly denied aiding criminals and stated that it collaborates with law enforcement agencies.

Make the Dollar Scream

Devasini, who is Italian, has had a varied career. He initially worked as a plastic surgeon in Milan, then later ran an electronics import business in Hong Kong. In 1995, Italian prosecutors accused him of involvement in operating a software piracy ring, committing fraud. Devasini reached a plea deal with the authorities and paid a settlement to Microsoft.

Later, he got involved in the emerging cryptocurrency industry and found an opportunity about a decade ago. Cryptocurrency companies struggled to connect their digital currencies to the real-world banking system.

Paolo Ardoino is one of Devasini's key aides, often representing USDT in public.

USDT was launched in 2014, registered in the British Virgin Islands, with the aim of addressing this issue. Traders could convert their real-world currency into USDT pegged to the dollar and almost instantly swap this stablecoin for other tokens via blockchain.

For Devasini, USDT is intended to disrupt traditional finance. His wife, an artist, showcases paintings where George Washington on the dollar bill is screaming, believing the dollar has "lost its value."

Allaire's mission is different. This 53-year-old American is a seasoned Silicon Valley entrepreneur, having served as CTO at the software company Macromedia, which pioneered Flash animation technology. Allaire founded Circle in Boston the year before USDT's launch, aiming to create a new financial system for the internet age to address the inefficiencies and complexities of the banking network that often lead to issues with international payments.

Hemant Taneja, CEO of venture capital firm General Catalyst, stated that while most cryptocurrency community members enjoy unregulated markets, Allaire's strategy with Circle, developing it through collaboration with regulatory bodies, is an "ironic bet against the obvious."

Taneja and other prominent American investors, including venture capitalist Jim Breyer, known for early investments in Facebook, have supported Allaire's vision with investments. Goldman Sachs, BlackRock, and Fidelity, as well as cryptocurrency exchange Coinbase, later invested as well. Allaire remains the largest individual shareholder in Circle.

When Allaire sought a money transmission license, regulators were skeptical. In this young, untested, and scam-ridden industry, he quickly earned a reputation as the 'most credible adult in the room.' At the end of 2013, Allaire testified before Congress for the first time, calling on the U.S. to take the lead in regulating cryptocurrency to prevent criminal activity.

Breyer said, "He's the most formidable I've seen in dealing with senior Washington politicians."

In 2020, as cryptocurrency trading went mainstream, Circle and USDT began to blame each other.

In January of that year, Allaire tweeted, "USDT's biggest feature is its non-compliance and opacity." He pointed out that USDT had become the choice for those looking to bypass the financial system.

In a letter to U.S. and other authorities, Circle warned of the potential harm of unregulated stablecoins to consumers. In July of the same year, Circle alerted the Financial Stability Board, responsible for monitoring the global financial system, to an incident that had occurred two years earlier, when a significant amount of USDT was seized by authorities in a money laundering investigation, temporarily breaking its peg to the U.S. dollar. Circle stated that this indicated potential issues with such stablecoins, risking consumers' cryptocurrency assets.

Circle promoted its transparency and released audited financial statements in 2021. It later engaged the services of Deloitte to audit comprehensive monthly reports covering the U.S. dollar reserve, primarily composed of U.S. Treasury bonds, along with some short-term Treasury loans and cash.

In contrast, USDT's financial reports are much less detailed and were only released under regulatory pressure from the state of New York. USDT also supplements its Treasury reserve with Bitcoin, commercial paper, gold, and other unspecified investments.

Information reviewed by The Wall Street Journal showed Devasini complaining to associates about unfair comparisons with Circle. He referred to USDC as a 'garbage coin,' claimed that auditors were reluctant to work with USDT due to reputational issues, and alleged that rumors about his company were being spread online.

'Transition to Quality Assets'

After years of lackluster returns, in 2022, USDT and Circle unexpectedly received a massive influx of funds. As the Fed raised rates, the U.S. Treasury yields held by USDT surged from tens of millions annually to hundreds of millions quarterly.

A monitoring screen in Hong Kong displays the prices of various cryptocurrencies, including USDT and USDC.

Devasini hardly spent this windfall on himself. He often showed up at meetings wearing worn-out tracksuits, a cap that read "idiot," and a lanyard around his neck carrying keys and storage devices. Nevertheless, he enjoyed boasting to his peers about how much USDT was coming in daily.

He also felt that his newfound wealth made him a target. In December of that year, at a conference in the Bahamas, Devasini told a business partner that he believed USDT posed a threat to the US-dominated international banking order, and the White House might try to shut down USDT at any time.

Meanwhile, Allaire was deepening ties with the traditional financial world. By the end of 2022, Circle had most of its reserves held in the world's largest custodial bank, the Bank of New York Mellon, with some cash held in other regulated financial institutions. BlackRock managed its US Treasury bond portfolio.

Insiders familiar with USDT revealed that the company was mostly run by Devasini and a small group of industry outsiders, including the combative Italian computer programmer Ardoino. In contrast, Circle had hundreds of employees and a board of directors composed of former corporate executives.

As USDC began to catch up with its competitors, Allaire tweeted about "transitioning to quality assets," suggesting traders were abandoning USDT in favor of USDC.

However, when Silicon Valley Bank collapsed in March 2023, Circle faced difficulties, with over $30 billion of cash reserves trapped therein. Panicked traders started selling off USDC, causing its price to drop to $0.87.

USDT took advantage of Circle's plight, claiming it was unaffected by the Silicon Valley Bank collapse. As traders began to flock back to USDT, Ardoino retorted on Twitter, "Transition to safety assets."

After regulatory intervention rescued Silicon Valley Bank, USDC was restored to being pegged to the dollar. In the remaining months of the year, around $20 billion flowed out of USDC.

Ardoino warned that people should "be truly cautious" of stablecoin companies like Circle that hold reserves in uninsured cash deposits, stating that this made USDC vulnerable in the event of a bank collapse, even though a few years earlier USDT had also experienced a fund freeze. Allaire stated that Circle needed to keep a small portion of its cash reserves outside of the Bank of New York Mellon and other major global banks to facilitate redemptions for clients.

In June of the same year, Allaire petitioned Congress for the passage of a stablecoin bill that would establish strict reserve requirements and allow issuers to hold cash with the Federal Reserve. He launched a scathing attack on USDT, calling for measures to ban the circulation of a digital dollar issued overseas and "not compliant with U.S. rules." He stated, "Most troubling, they are undermining America's national interest and security."

He and his deputies traveled globally — Japan, Singapore, EU, Brazil — advising governments in other countries to enact stablecoin-related laws and signing agreements with foreign bank partners to enable local Circle customers to transact directly with regulated entities.

Progress at Circle

Last year at his home in Lugano, Devasini became uneasy with increasingly stringent legal restrictions, driven both by mounting regulatory actions and allegations of USDT being used in criminal activities.

According to Lugano Mayor Michele Foletti, the Swiss small town was his "safe haven" from the outside world. Devasini often worked in a modest office above a sports bar and dined with Foletti at a restaurant that served bitcoin-themed pasta. Devasini's wife unveiled a statue of Bitcoin's anonymous creator Satoshi Nakamoto in a park by the lake.

Devasini told his associates he would not set foot in the U.S. In a chat group, he inquired about the fate of Kim Dotcom, the founder of the now-defunct file-sharing site Megaupload, whom the U.S. Department of Justice was trying to extradite on piracy charges.

In April 2024, the U.S. Treasury Department specifically noted that USDT was used to finance Russia's war machine. In June, billboards with the slogan "USDT tied to corruption" appeared in Washington, D.C., and Times Square in New York City. This was part of an advocacy group's campaign to raise awareness about USDT's use by terrorists and drug cartels. The organization referred to the USDT company as the "next FTX."

Devasini believed Circle was behind all of this. He told a business partner, "Every attempt to discredit USDT has them behind it."

Ardoino later publicly accused USDT's competitors of funding this advocacy group's activities. The organization, known as "Consumer Research," had previously initiated campaigns against environmental, social, and corporate governance investing, claiming to never disclose the identity of donors.

The Circle company declined to comment on this.

However, according to sources familiar with the discussions, throughout the year 2024, Circle company executives frequently met with senior U.S. Treasury officials and other authorities, highlighting the national security risks posed by USDT's existence. In February of this year, during a congressional hearing, when asked about USDT, Circle company's Senior Policy Director expressed her wish for U.S. authorities to investigate how USDT facilitates "nefarious activities."

These sources noted that the U.S. Treasury Department is very concerned about USDT's widespread use by adversaries within the U.S. and is even considering whether to sanction USDT itself. This would exclude USDT from the U.S. banking system, likely leading to its demise. The Treasury Department also requested new powers from Congress to combat dollar-backed foreign stablecoins, with USDT as the prime target, although these powers have not been approved.

In April, U.S. Democratic Senator from New York Kirsten Gillibrand and Republican Senator from Wyoming Cynthia Lummis introduced a bill to ban unregulated stablecoins. Lummis remarked at that time, "If I had to choose, I'd choose USDC over USDT."

U.S. Senator Cynthia Lummis Proposes Cryptocurrency Regulation Bill

Under the new regulations, Circle company also obtained a license to operate in the EU, which requires stablecoin issuers to hold at least a 30% cash reserve in local banks. USDT opposes this condition, arguing that it would increase risks, citing the collapse of Silicon Valley Bank as an example. In response, Coinbase and other exchanges delisted USDT in the EU region.

Another win for the Circle company came in December of last year when the world's largest cryptocurrency exchange, Binance, partnered with it to foster USDC adoption. For years, this once unruly exchange had been a center for USDT trading. However, by the end of 2023, after admitting to violating U.S. financial crime laws, Binance also sided with Allaire.

New Government

Devasini has an ace up his sleeve: Commerce Secretary Lutnick, whose company Cantor Fitzgerald holds U.S. Treasury bond reserves for USDT.

Lutnick personally negotiated a deal to allow Cantor to invest in Tether's parent company through convertible bonds in April 2024. The following month, Devasini told colleagues that a Trump ally would seek to block any legislation that could harm Tether after a meeting with Lutnick in Lugano. Devasini added that Lutnick also had a dislike for Circle.

The U.S. Department of Commerce did not respond to a request for comment. A Cantor spokesperson declined to comment.

Individuals close to Lutnick said that Lutnick helped Devasini establish connections with the Trump camp. A month after Trump's victory, Tether spent $775 million to acquire a stake in the conservative media platform Rumble, with Cantor handling the transaction. Rumble CEO Chris Pavlovski is a close friend of Donald Trump Jr. and has tweeted that Tether is spreading "American freedom."

In February this year, President Trump met with Howard Lutnick in the Oval Office, and a few days later, he was appointed Secretary of Commerce.

During Lutnick's confirmation hearing, senators pressured him to explain potential conflicts of interest regarding Tether. He claimed that criminals use Tether more than USDC simply because Tether has a larger market. "It's like blaming Apple because criminals use iPhones," he said.

When Democratic Senator Maria Cantwell of Washington asked Lutnick if he would block any legislation regulating Tether, Lutnick responded that he had repeatedly voiced his belief that Congress should be careful not to undermine the "dollar hegemony on the blockchain," indicating that Congress should not enact overly burdensome legislation for companies like Tether to avoid them losing market share.

He did not commit to interfering with any federal investigation into Tether, only stating that he would adhere to government ethics laws. Regarding his previous discussions with Devasini, Lutnick wrote, "I have never insinuated to anyone that I would do anything improper with respect to Tether."

Trump issued an executive order aimed at promoting a "legally backed global US dollar stablecoin." The order established a President's cryptocurrency working group, which includes Lutnick, to review regulations to be repealed or amended.

After Lutnick left Cantor, his son, Brandon Lutnick, was appointed as the company's chairman, having previously interned at Tether in Lugano.

Meanwhile, Circle donated $1 million to a super PAC supporting cryptocurrency-friendly candidates and $1 million to Trump's inauguration committee.

Senator Kirsten Gillibrand helped introduce a bill that she said would allow legitimate cryptocurrency companies to compete on a level playing field

In February, Lummis and Gillibrand introduced a new stablecoin bill with two Republican senators, publicly welcomed by Allaire, with a similar proposal in the House. Gillibrand stated in an interview that the legislation would allow legitimate cryptocurrency companies to compete on a level playing field, "without being disadvantaged or disrupted by scammers without security standards and transparency."

She said, "I don't think Tether currently meets the requirements."

Since mid-December, USDT, after being delisted from some exchanges, its growth has begun to slow down.

Circle's stock price has been soaring, and in early February, the total value of USDC finally surpassed pre-Silicon Valley Bank event levels. The company is about to move into its new headquarters at the World Trade Center in New York.

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