Epstein Questions Stablecoin Structure and Exchange Revenue Models

According to documents released by the U.S. Department of Justice, Jeffrey Epstein questioned Madars Virza about stablecoins and the revenue models of exchanges on October 1, 2018. Epstein asked, "How do exchanges make money?" and expressed curiosity about a situation where a stablecoin is trading at $1.10 when he deposits $1. Virza explained that stablecoins can be divided into two types. The first type involves depositing $1 in a bank to receive a stablecoin, like Tether and Gemini Dollar, while the second type is algorithmic, maintaining its price based on virtual assets. Virza warned that the algorithmic method could collapse during market downturns. He also noted that there is a widespread perception that Tether was created for exchanges that do not comply with KYC and AML regulations, while Gemini is evaluated as prioritizing regulatory compliance. Virza mentioned that the bank Tether was using at the time was under significant pressure, adding that it was "risky."

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