Notes 2/3: Tether Ownership, Bitcoin Premium in Nigeria

One of the numerous mysteries in cryptocurrencies is the ownership of Tether – the world’s biggest stablecoin by market capitalization. The Wall Street Journal (WSJ) yesterday provided some answers to that question. Their report claims 86% of Tether Holdings is controlled by four men.  

Who Owned Tether Tokens?  

The four men identified as Tether holders by WSJ are company insiders, who stand to mint profits from the stablecoin’s business and investment activities. They are a motley bunch and consist of its chief financial officer Giancarlo Devasini, general counsel Stuart Hoegner, CEO Jean Louis van der Velde, and investor Christopher Harborne. Devasini, who was a plastic surgeon in an earlier life and an advisor to the stablecoin, held 43% of equity in Tether Holdings while Hoegner and van der Velde held 15% each in 2018. Harborne held 12% of its equity at some point in time, probably 2018. (The WSJ article does not assign an exact timeframe for his ownership).   

None of the four men seems to have had much prior experience with digital assets, much less with cryptocurrencies, before their brush with Tether. Their pasts are also tainted due to associations with dubious entities. Three – Devasini, Hoegner, and van der Velde – were part of companies that were forced to settle with regulators due to operational irregularities and patent infringements. Harborne was a prolific donor to Brexit causes and political parties that espoused anti-immigrant rhetoric, even as he lived in Thailand and adopted a local name.  

Profiting From Tether’s Expansion  

One of the interesting factoids in the WSJ piece is the timeframe of ownership. 2018 was a momentous year for Tether. The stablecoin had racked up meager volumes until then because it was only available on Bitcoin’s Omni chain. The cryptocurrency’s problems with scaling – low speeds and clogged transaction – undercut Tether’s efforts to become a connecting rail between various exchanges.

Binance’s late 2017 launch and its decision to begin accepting Tether on the Ethereum blockchain sped transaction volumes to $2 billion from $20 million earlier. In 2018, Tether’s market capitalization skyrocketed and the number of exchanges working with the stablecoin multiplied.

The expansion in business operations must have had a cumulative effect on the stablecoin’s revenues and profits. But the beneficiaries remained a mystery because the company stopped disclosing identities of the team behind its stablecoin. It prominently displayed the names and bios of its executive team and advisors on its website until 2016.

Bitcoin Premium in Nigeria

In echoes of 2018’s South Korea’s “Kimchi premium” in the price of Bitcoin, the cryptocurrency began trading at a premium in Nigeria in last week. Based on reports, the price of a single Bitcoin was as much as 60% higher than its cost at other exchanges. But that high cost was not due to demand from Nigerian consumers caught in the middle of a government demonetization drive. Rather, it seems to have been a function of the difference between official and parallel markets for US dollars in the country. Bitcoin is priced in dollars at NairaEx, one of the biggest cryptocurrency exchanges in the country. That, at least, is the official story. But it ignores the state of crypto in that country. The Central Bank of Nigeria banned commercial banks from transacting with cryptocurrency exchanges in 2021. Even after the ban, some claimed that Nigerians were flocking to Bitcoin. They must have been a brave lot considering the difficulties in cashing out of their investments in bitcoin.

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