Two Titans Battle For Crypto's Future --- Stakes are high in Tether and Circle's fight over how to regulate coins

"LUGANO, Switzerland -- Giancarlo Devasini, one of the world's newest billionaires, leads a reclusive life in this Alpine town. He stays in a modest apartment by the lake, strolls the cobbled streets with a black hoodie pulled over his head -- and rages about the American rival he believes is trying to kill his business.

Devasini is the main owner of Tether, whose eponymous digital dollar is an indispensable part of the cryptocurrency industry. Tether's centrality has earned Devasini tremendous wealth and vast influence over the sector, and the support of a top ally of President Trump.

Critics say Tether has become the tool of choice for criminal groups to spirit money around the globe.

Out to disrupt his business empire is Devasini's almost perfect foil, Jeremy Allaire, founder of Tether's archrival, Circle, which issues its own so-called stablecoin, called USD Coin, or USDC. Allaire, a suit-wearing executive as comfortable in Davos as he is on Wall Street or the halls of Congress, is running a campaign to regulate Tether out of existence.

Devasini has told business associates that Circle is bad-mouthing Tether to politicians and whipping up enforcement actions against his company. They said that in his view, Circle wants to turn the industry into just another regulated corner of finance, while Devasini wants crypto to stay true to its swashbuckling, antiestablishment roots. "Circle will not win if Tether is alive," Devasini told an associate several months ago.

The fight is over the future of the $3 trillion crypto industry. The pro-crypto Trump administration is meant to usher in a golden age for the sector, and on Sunday, Trump announced the formation of a crypto strategic reserve. But in reality, the call to bring crypto into the mainstream through government regulation has opened up a kill-or-be-killed battle among crypto players. Laws, while expected to be broadly friendly to the industry, could be devastating for individual players such as Tether if they are on the wrong side of new rules.

Allaire has encouraged the U.S. and others to pass laws that ban the use of Tether's tokens, which are issued offshore. One such law fully took effect in the European Union in December, and similar bills have been introduced in the U.S.

Tether is the clear industry leader -- its stablecoin is used in four out of five cryptocurrency transactions. Tether's holding company, of which Devasini owns half, said it earned $13 billion in profit last year, double that of BlackRock and mostly generated from the pile of supersafe Treasury bills that Tether owns to back its currency 1-to-1 with the dollar.

Allaire has regularly testified in Congress to call for greater regulation that would benefit Circle at Tether's expense. A top deputy pressed lawmakers last year to target Tether, citing its tokens' use in terrorist financing. The Wall Street Journal reported in October that the Justice and Treasury Departments were investigating Tether for possibly violating financial crime laws. "We want to make sure that USDC is the preferred digital dollar," Allaire said in an interview.

Devasini, in contrast, eschews the spotlight and almost never speaks publicly. On paper, the 60-year-old has been Tether's chief financial officer, and on Monday the company said he would transition to become chairman. In reality, he has always run the operation -- even though he passes out business cards that say "No title, No job, Nothing." Behind the scenes, he is counting on allies such as Commerce Secretary Howard Lutnick, whose firm Cantor Fitzgerald holds much of Tether's reserves, to snuff out hostile legislation backed by Circle, associates said. Lutnick stepped down from Cantor after his confirmation in February.

Both companies declined to comment on the other directly. Circle isn't focused on the "unregulated money world," Allaire said, but rather the entire $100 trillion market for legal electronic money.

Tether has repeatedly denied aiding criminal actors and has said it cooperates with law-enforcement agencies.

Devasini, an Italian, charted a peripatetic career, first as a plastic surgeon in Milan, then as an electronics importer in Hong Kong. He later discovered the nascent crypto industry, and spotted an opportunity.

Crypto companies couldn't connect their digital currencies with the real-world banking system.

Launched in 2014 and registered in the British Virgin Islands, Tether aimed to fix this problem. Traders could exchange their real-world currencies for tether at a value pegged to the dollar, and exchange the stablecoin for other tokens near instantaneously via digital blockchains.

In Devasini's eyes, tether was meant to subvert traditional finance. His wife, an artist, exhibited paintings of dollar bills with the image of George Washington screaming because, she said, they had "no more value."

Allaire's mission was different. The American, now 53, was an established Silicon Valley entrepreneur who had served as chief technology officer at software firm Macromedia, which pioneered Flash animation.

With Circle, which he set up in Boston the year before Tether's debut, Allaire wanted to create a new financial system that would update an inefficient patchwork of banking networks that often snarled international payments.

While most of the crypto community relished the unregulated marketplace, Allaire's strategy to grow Circle by working with regulators was ironically "the contrarian bet," said Hemant Taneja, CEO of venture-capital firm General Catalyst, where Allaire had also worked.

Taneja and other big-name U.S. investors, including fellow venture capitalist Jim Breyer, known for his early stake in Facebook, lined up to fund Allaire's vision. Goldman Sachs, asset-managers BlackRock and Fidelity, as well as crypto exchange Coinbase, all later invested, too. Allaire remains Circle's largest individual shareholder.

Allaire first testified before Congress in late 2013 and called for the U.S. to take the lead in putting guardrails on crypto to avoid allowing criminals to seize the advantage. "He is as good as anyone I know at sitting down with very senior Washington politicians," Breyer said.

The mudslinging between Circle and Tether started when crypto trading hit the mainstream in 2020.

Tether's "greatest feature is its non-compliance and opacity," Allaire tweeted in January that year, noting it had become a solution for those wanting to bypass the financial system.

In letters to authorities in the U.S. and elsewhere, Circle raised the alarm about how unregulated stablecoins could harm consumers. Circle that July flagged to the Financial Stability Board, an international body that monitors global finance, an incident that happened two years earlier in which tether temporarily lost its dollar peg because authorities seized a chunk of its reserves as part of a money-laundering investigation.

Circle promoted its transparency and released audited financials in 2021. It later hired accounting firm Deloitte to sign off on comprehensive monthly statements covering USDC's reserves, which consist mostly of Treasurys, plus some short-term Treasury loans and cash.

Tether, in contrast, releases financial statements that are far lighter in detail, and only after being forced by New York state regulators. Tether also supplements its Treasurys with bitcoin, commercial loans, gold and unspecified other investments.

Devasini griped to associates in messages reviewed by the Journal about unfair comparisons with Circle. He branded USDC a "shitcoin" and said auditors wouldn't work with Tether due to its reputation, claiming others were spreading lies about his company online.

After years of mediocre returns, Tether and Circle stumbled into a gusher of money in 2022. When the Federal Reserve raised interest rates, Tether's Treasury holdings went from earning tens of millions of dollars a year to hundreds of millions a quarter.

At a meeting in the Bahamas that December, Devasini told a business partner he believed Tether posed such a threat to the U.S.-dominated international banking order that the White House could seek to shut it down at any moment.

Allaire, meanwhile, was deepening his ties to the traditional financial world. By the end of 2022, Circle kept most of its reserves at Bank of New York Mellon, the world's largest custody bank, as well as some cash at other regulated financial institutions. BlackRock managed its Treasury portfolio.

Allaire tweeted "Flight to quality" about traders ditching tether for USDC as his stablecoin gained ground on its rival.

But Circle stumbled when Silicon Valley Bank collapsed in March 2023, trapping over $3 billion of Circle's cash reserves. Spooked traders rushed to sell USDC, knocking its price down to 87 cents. Circle's price isn't meant to fluctuate from $1.

Tether touted that it had no exposure to SVB. "Flight to safety," retorted Ardoino on Twitter as traders flooded back.

USDC recovered its peg after regulators rescued SVB, which included many depositors who held cash far above the federal insurance level. Some $20 billion drained out of USDC over the rest of the year.

Ardoino warned that people should "truly beware" of a stablecoin company like Circle for keeping reserves in uninsured cash deposits. Allaire said Circle needed to keep a small portion of its cash reserves outside BNY Mellon and other major global banks to facilitate customer redemptions.

That June, Allaire petitioned Congress for a stablecoin bill that would mandate strict reserve requirements and allow issuers to hold cash at the Federal Reserve. In a broadside against Tether, he called for measures to bar the circulation of digital dollars issued offshore that "do not play by U.S. rules."

Devasini was unnerved by tightening legal strictures -- caused both by growing regulations and allegations of criminal use of tether.

Devasini told associates he wouldn't travel to the U.S. In a chat group, he asked for information about the fate of Kim Dotcom, founder of the defunct Megaupload website, whom the Justice Department was seeking to extradite on piracy charges.

In April 2024, Treasury singled out tether for being used to help fund Russia's war machine. In June, the slogan "Tethered to Corruption" appeared on billboards in Washington and New York. It was part of an advocacy group's campaign to bring attention to tether's use by terrorists and drug cartels.

Devasini saw Circle's hand in the attention. "They are behind every single attempt to bad-mouth Tether," Devasini told a business partner. Ardoino publicly accused Tether's competitors of funding the group's campaign. The group, Consumers' Research, said it never discloses donors' identities.

Circle declined to comment.

Circle executives regularly met with Treasury officials and other authorities throughout 2024 to flag tether's national security risks, according to people familiar with the discussions.

Treasury was so concerned by tether's proliferation among America's enemies that it considered whether to impose sanctions on Tether itself, the people said. This would lock Tether out of the U.S. banking system, likely dooming its business. The department also requested new powers from Congress to target offshore dollar-backed stablecoins, aiming to rein in Tether, though the powers weren't approved.

Circle obtained a license to operate across the EU under new regulations that required stablecoin issuers to hold at least 30% of their reserves in cash in local banks. Tether opposed the condition as creating more risk, citing SVB's collapse. Coinbase and other exchanges delisted tether tokens for their EU clients in response.

Another win for Circle came in December when Binance, the world's largest crypto trading platform, partnered with it to grow USDC's adoption.

Devasini had an ace up his sleeve: Commerce Secretary Lutnick, whose firm Cantor Fitzgerald held Tether's Treasurys.

Lutnick had personally negotiated a deal for Cantor to invest in Tether's holding company via a convertible bond in April 2024. Following a meeting with Lutnick in Lugano the following month, Devasini told associates the Trump ally would seek to kill any bills that could harm Tether. Lutnick shared his dislike of Circle, Devasini added.

The Commerce Department didn't respond to requests for comment. A Cantor spokeswoman declined to comment.

Lutnick helped Devasini cultivate ties to the Trump camp, the associates said. After Trump's election win, Tether paid $775 million for a stake in conservative streaming platform Rumble. Cantor managed the deal. Rumble Chief Executive Chris Pavlovski, a close friend of Donald Trump Jr., tweeted that Tether was spreading "American freedom."

Senators pressed Lutnick about his potential conflict of interest over Tether during his confirmation hearings. He claimed criminals only used tether more than USDC because it had a larger market. "It's like blaming Apple because criminals use Apple phones," he said.

When Sen. Maria Cantwell (D., Wash.), asked Lutnick in written follow-up questions whether he would ever undermine any bills to regulate Tether, he responded that he had repeatedly conveyed his belief that Congress should take care not to undermine "dollar hegemony on blockchain," indicating Congress shouldn't make legislation so onerous for companies like Tether that they lose market share.

He didn't commit to not interfere in any federal investigations into Tether, writing he would fulfill his duties in line with government ethics laws. Regarding his discussions with Devasini, Lutnick wrote, "I have never suggested to anyone that I would do anything improper with respect to Tether."

Sen. Kirsten Gillibrand (D., N.Y.) and others put forth a new stablecoin bill in February, which Allaire publicly cheered, and the House introduced a similar proposal. Gillibrand said in an interview the legislation would allow serious crypto companies to compete in a fair marketplace, "and not be disadvantaged or undermined by charlatans or purveyors that have no safety standards and have no transparency."

"I don't think Tether today would qualify for the requirements," she said.

Tether's growth has slowed since mid-December after its token's removal from some exchanges.

Circle has been rocketing, with the total value of USDC finally eclipsing the pre-SVB level in early February. The company is soon moving into new headquarters in New York's World Trade Center." [1]

1.  Two Titans Battle For Crypto's Future --- Stakes are high in Tether and Circle's fight over how to regulate coins. Berwick, Angus.  Wall Street Journal, Eastern edition; New York, N.Y.. 05 Mar 2025: A1.