Original Author: Rukawa Kaede
Original Compilation: Lyric, ChainCatcher
Author Zeke Faux, due to his deep interest in crypto, has delved into research and investigation of Tether (USDT), ultimately writing this book to reveal the behind-the-scenes manipulation of Tether and its impact on the crypto market. The key points of this article mainly revolve around how Giancarlo Devasini, through the operation of the Tether stablecoin USDT, has risen in the global crypto market, despite the fact that Tether initially promised a 1:1 USD reserve backing, but has frequently faced regulatory scrutiny due to opaque fund flows, frequent issuance, and incidents of hacking and mysterious fund operations, especially in Southeast Asia, where it has become a tool for illegal fund transfers. However, he is still pushing projects such as the Bitcoin bond plan to continuously expand his business footprint.
In January 2021, when COVID-19 swept the globe and the crypto market frenzy was on the rise, this article will unveil the complex financial operations and regulatory dilemmas behind the Tether (USDT) stablecoin, including the top management and fund flows of Tether, especially the background and modus operandi of one of its actual controllers, Giancarlo Devasini, presenting a little-known financial experiment.
The Origin and Development of Tether
Initially conceived by Brock Pierce and named "RealCoin", the project later teamed up with the offshore exchange Bitfinex and launched Tether in 2013, featuring a 1:1 USD reserve-backed stablecoin model. However, from its inception, Tether has been plagued by questions about its operating model: in the absence of comprehensive global regulation, its fund flows and asset reserves have remained opaque and complex. Tether not only provided critical liquidity support to exchanges, but also played the role of the "last lifeline" in times of extreme market volatility, but its behind-the-scenes banking relationships and fund management have been shrouded in doubt.
Giancarlo Devasini: From Plastic Surgeon to Crypto Tycoon
Giancarlo Devasini, the core figure of Tether, has had a tumultuous personal journey. Born in 1964 in Turin, Italy, Devasini initially worked in plastic surgery, later shifting to the field of electronic product imports and software resale, even involving in pirated software transactions. It is reported that he quickly rose in the business world with his highly adventurous spirit and unconventional business practices, amassing a net worth of about $9.2 billion, at one point surpassing the wealth of top executives of well-known luxury car companies.
Bitcoin: A Peer-to-Peer Electronic Cash System www.bitcoin.org
After reading the Bitcoin whitepaper, Devasini saw the immense potential of the crypto world, subsequently investing in Bitfinex and gradually getting involved in the Tether business, ultimately gaining control of about 40% of Tether's equity through acquisitions and strategic deployments. His background and modus operandi have laid the groundwork for Tether's business model and risk control.
Maneuvering in the Storm: Hackers, Banking Crises, and Fund Mysteries
In 2016, Bitfinex suffered the largest-scale hacking attack in history, with about 119,756 Bitcoins stolen, resulting in massive asset losses. Facing the crisis, Bitfinex implemented a 36% across-the-board account deduction measure and issued debt tokens (BFX) to compensate user losses. Investigations have pointed out that in this incident, the complex fund flows between Tether and Bitfinex further fueled public doubts about the true reserve capacity of USDT.
At the same time, Tether also faced severe challenges in fund management. In 2017, the company deposited funds in multiple banks in Taiwan and other regions, but due to the concerns of intermediary banks about crypto business, many banks subsequently terminated cooperation, leading to the funds being stranded. Even with bank accounts frozen and fund flows obstructed, Tether continued to issue large amounts of USDT on the Bitcoin Omni Layer, a practice that further questioned the authenticity of its 1:1 reserve.
Court records and regulatory investigations have shown that Tether itself has admitted to being unable to use the traditional banking system normally, and the behind-the-scenes fund operation model is more like a "wealth game", using the 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's Office, while investigating the fund flows between Bitfinex and Tether, discovered a large amount of complementary fund operations between the two. Bitfinex had quietly used Tether's reserve funds to fill a client withdrawal gap, and Tether's website subsequently removed the promise of "1:1 USD reserve backing".
The changes to Tether's website at the time sparked new concerns about the company's reserve policies.
Subsequently, Tether reached settlements and paid fines of $18.5 million and $42.5 million with the New York State and the U.S. Commodity Futures Trading Commission respectively, highlighting that its operating model has always been on the edge of regulation.
Furthermore, reports show that Tether has placed about a quarter of its funds (around $15 billion) in Deltec Trust Bank, and is also said to hold as much as $113 billion in U.S. Treasuries. These series of operations not only provide Tether with the flexibility to allocate funds, but also have given it a unique role in the global financial system.
Southeast Asian Market and Global Fund Flows
Globally, USDT has become the settlement base for many trading platforms and DeFi protocols. Investigations have revealed that in Southeast Asia, USDT is widely used for money laundering, fraud, drug trafficking, and even human trafficking, with its convenient cross-border transfer features providing low-threshold tools for criminals to evade regulation. In the Taiwan market, the USDT-TWD trading pair is in an absolute dominant position, demonstrating the irreplaceable position of stablecoins in global crypto asset trading.
At the same time, despite the successive bankruptcies in the crypto world, such as FTX, Celsius, and BlockFi, USDT has maintained strong market liquidity and demand, solidifying its core position in the entire crypto ecosystem.
Capital Operations and Future Deployments
Amidst the violent fluctuations in the crypto market, Giancarlo Devasini does not seem to have retreated due to the storm. In November 2022, he appeared in El Salvador, taking a photo with President Nayib Bukele, and there are reports that he is planning a $1 billion "Bitcoin Bond" (Volcano Bonds) project, aiming to further integrate global capital through Bitcoin assets. This move not only demonstrates his confidence in the future of the market, but also exposes Tether's commercial ambition to obtain excess returns through diversified operations.
At the same time, Tether's special position in the global financial system and its delicate relationship with the U.S. government are gradually coming to the surface. On the one hand, Tether provides financial support for the U.S. government to maintain the circulation of the U.S. dollar in developing countries; on the other hand, its massive U.S. Treasury position is also seen as an important asset to support the U.S. dollar system. It is this dual identity that has made Tether a focus of controversy and regulation as it continues to expand its market share.
Tether's Global Impact and Concerns
Tether and its behind-the-scenes operator Giancarlo Devasini play an important yet controversial role in the global crypto market. From the initial 1:1 reserve promise to the current complex and changing fund operation model, Tether has not only challenged the boundaries of traditional financial regulation, but has also to some extent become the "invisible driver" of the global U.S. dollar system. In this high-risk and high-return market, Devasini's presence makes one ponder: is he truly saving the entire industry, or is he merely manipulating a vast and dangerous capital game to satisfy his personal greed?
In the future, how the crypto market can find a balance between regulation and innovation, and how Tether and USDT will navigate this gray area, remain pressing issues that the industry and regulators need to address. This article represents the views of the author Rukawa Kaede and does not reflect the position of ChainCatcher, nor should it be considered investment advice.
