Tether Co-founder William Quigley: ‘Tether Has No Peg and Does Not Maintain a Peg to the US Dollar’
“In 10 years or less, all the world's major economies will tokenize their fiat,” says William Quigley. Image: CCN
William Quigley, a co-founder of Tether (USDT), clarified a common misconception that has puzzled many in the crypto community. Contrary to popular belief, USDT is not pegged to the US dollar. Quigley firmly stated,”Tether has no peg. We do not maintain a peg.”
The term “pegged” implies a strict one-to-one price ratio enforced at all times, a concept that Tether does not adhere to. Instead, Tether is redeemable for a dollar, meaning that it can be exchanged for a dollar but the price can fluctuate in the market based on supply and demand dynamics.
Quigley elaborated on the impracticality of maintaining a peg, “Pegging is a disaster, because that requires a massive balance sheet and even the biggest countries in the world can’t do it.”
Understanding Tether: Clarifications From William Quigley
The stability of Tether comes from its redeemability. “If you own a Tether, you can redeem it for a dollar, pay for it, trade it at whatever price you want. It’s not our problem,” he explained.
Market dynamics play a role in Tether’s price relative to the dollar. Tether is traded on hundreds of exchanges by millions of people, and its price can fluctuate based on supply and demand. Quigley noted, “There are times when tether trades slightly above and slightly below a dollar. It will never trade perfectly for a dollar.”
This fluctuation is similar to how traditional currencies trade against each other, influenced by local market conditions and regional exchanges. For example, during market downturns, people might rush to buy Tether as a safe harbor, pushing its price slightly above a dollar. This behavior mirrors the ins and outs of conventional currency trading, where economic forces dictate value rather than a fixed peg.
Understanding that Tether’s stability is rooted in its redeemability, not a fixed peg, provides clarity for investors and users. Quigley’s insights highlight the nuances of Tether’s operational model and the broader market dynamics that influence its value.
Tether and the Future of Digital Currencies
Quigley shed light on the significant differences between Tether and potential central bank digital currencies (CBDCs). While Tether is a privately issued stablecoin, CBDCs would be issued by central banks. This fundamental difference brings about distinct challenges in control and innovation.
Quigley noted, “Government control and innovation stops whenever the government gets involved, it just dies.” He argued that CBDCs, being government-controlled, might lack the innovative edge seen in privately issued stablecoins like Tether.
The cost and complexity of developing government-backed stablecoins are also significant. Quigley explained:
“If a government of any minor size or even the U.S. government wanted to do this, it would be an enormous undertaking. It would probably require a line item in the federal budget, and it might take five years to actually roll out.”
This stands in stark contrast to the relatively low cost and quick development of Tether. Quigley highlighted that Tether was built in 2014 for only $500,000. This difference in development resources and time underscores the agility of private enterprises compared to government efforts.
Despite these challenges, Quigley acknowledged the benefits of tokenized fiat. He suggested that in the long run, all major economies will adopt tokenized fiat. He emphasized that tokenization offers numerous benefits with minimal drawbacks, making it an attractive innovation for central banks.
However, Quigley pointed out that the inherent control governments seek to maintain could stifle the innovation seen in the decentralized and private sector of cryptocurrency. The potential for central banks to adopt tokenized fiat exists, but the agility and innovative spirit of private issuers like Tether provide a compelling case for the future of digital currencies.
Quigley’s insights highlight the dynamic between private innovation and government control, and how this relationship will shape the evolution of digital currencies. His perspectives provide a deeper understanding of the challenges and opportunities in the realm of stablecoins and CBDCs.
Bitcoin’s Role and Limitations
Bitcoin (BTC) is known as the original cryptocurrency and a revolutionary financial technology. However, William Quigley emphasizes that its role is more of a store of value rather than a functional payment system.
He bluntly states, “Bitcoin is a failure from a payment standpoint. It’s been around for 15 years. No one uses it for payments.” This assertion underscores Bitcoin’s limitations in everyday transactions due to its volatility and the complexity involved in its usage.
Quigley explains that Bitcoin’s long-term holding patterns also reflect its role as a store of value.
A significant portion of Bitcoin remains unmoved for extended periods: “80 percent of Bitcoin hasn’t been moved in a year because it’s a pain to move.” This behavior aligns with the characteristics of an asset held for its potential appreciation rather than for daily spending.
In comparison, stablecoins like Tether seem to offer more practicality for transactions. Quigley highlights that “if you want to bypass any fees or all this kind of stuff,” using Tether is more feasible than Bitcoin. Stablecoins maintain a relatively stable value, making them suitable for everyday use without the concerns of significant value fluctuations.
The convenience factor plays a significant role in the adoption of payment systems. Quigley observes, “Consumers pray to the god of convenience. Everything is about convenience.” Bitcoin’s current infrastructure does not offer an easy on-boarding experience provided by traditional or even stablecoin-based systems. This lack of convenience is a barrier to its adoption as a mainstream payment method.
Overall, while Bitcoin remains a significant store of value and an investment asset, its practical use as a payment system is overshadowed by stablecoins and other more user-friendly digital currencies.
Other Topics of Discussion:
- Tether’s Origins and Catalysts
- Challenges with Altcoin Exchanges
- Development of Tether
- Misconceptions About Tether’s Peg
- Stablecoin Market Dynamics
- Impact of Tether on Crypto Trading
- Regulatory Perceptions of Tether
- Central Bank Digital Currencies (CBDCs)
- Peer-to-Peer Payments and Convenience
- Bitcoin’s Role and Limitations
- DeFi and Financial Innovation
- ETFs and Financial Stability
- Future of Crypto and Economic Outlook
Interview
🎙️ In a recent interview with @CCNDotComNews , @WilliamEQuigley , a co-founder of Tether (USDT), clarified a common misconception that has puzzled many in the crypto community. Contrary to popular belief, #USDT is not pegged to the US dollar.
⬇️ Some Key Takeaways from the… pic.twitter.com/fSMn9pdY0D
— CCN (@CCNDotComNews) July 16, 2024
