What Is Tether (USDT)?

Tether, also known as USDT, is a cryptocurrency stablecoin pegged to the value of one US dollar. Since its launch, Tether has grown into the largest stablecoin by market capitalization. It claims to be backed by fiat reserves and other financial instruments and is natively available across 16 different blockchains.

Key Takeaways

• USDT is a stablecoin that claims to be 100% backed by an equivalent amount of reserves held by its issuer, Tether Limited, to maintain the stablecoin’s peg to 1 US dollar.

• Tether’s reserves mainly consist of US Treasury Bills and other cash equivalents, along with small allocations to secured loans, precious metals, Bitcoin, and other investments.

• USDT is a centralized stablecoin, which gives Tether the ability to freeze stablecoins from being transferred, in accordance with requests from law enforcement and governments.

• Since its inception, Tether has grown to become the largest stablecoin by market capitalization. As a result, it has also attracted significant scrutiny from the industry regarding the transparency and traceability of its reserves.

• Over the past 10 years, USDT has expanded beyond the initial Bitcoin Omni Layer to a variety of different blockchains, with native USDT now being issued on 12 different networks.

Introduction to Tether (USDT)

Launched in 2014 by Tether Limited, Tether (USDT) is a token with stable value relative to the US dollar, enabling users to retain and transfer value on the blockchain. Tether has also emerged as by far the most popular asset pair for crypto trading, with by far the highest volume among all coins. 

As a stablecoin, Tether is pegged to the value of 1 US dollar and claims to be fully backed by Tether’s assets and reserves. The breakdown of these reserves, which mostly consist of US Treasury Bills and other cash equivalents, along with small allocations to secured loans, precious metals, Bitcoin, and other investments, can be observed through the firm’s quarterly Reserves Report.

A key promise of Tether is the ability to redeem the tokens for fiat currency. Users can exchange their Tether tokens for the underlying cash from the platform’s reserves, allowing arbitrageurs to take advantage of any downward depegs and ensure that Tether remains on-peg. However, there is a barrier to physical redemptions – users will need to establish a verified Tether account by undergoing anti-money laundering checks and KYC procedures that come with a $150 verification fee. Next, holders will need to redeem a minimum number of tokens equivalent to 100,000 USD and pay a 0.1% redemption fee. However, as Tether is now widely supported across many centralized crypto exchanges (CEXes), most of them do typically offer a way for their users to offramp their USDT.

Regardless, the introduction of Tether to address the need for an on-chain token with stable value has brought numerous benefits to various parties within the crypto space. Without the price volatility, everyday users can utilize Tether across various projects as collateral or transfer funds quickly and cheaply to others without relying on legacy banking rails. Merchants can also integrate Tether as a digital form of payment, allowing users to make real-world purchases directly with the stablecoin. Furthermore, Tether plays an extremely important role in centralized and decentralized exchanges and is often the most popular trading pair against the extensive list of crypto assets that exist today.

While Tether used to be available on just a handful of networks, crypto’s multichain state has promoted the expansion of USDT across a wide range of networks and Layer 2 solutions. Yet, most of these representations of USDT are merely wrapped or bridged versions of the original tokens, which are only issued natively across selected networks, including Ethereum, Tezos, and Tron. Beyond USDT, Tether has also issued stablecoins pegged to other fiat currencies and even commodities such as gold. Popular examples include EURT pegged to the value of Euros and Tether Gold (XAUT), which follows the value of 1 troy ounce of gold.

Going beyond the norms of traditional stablecoins, the firm has also introduced Tethered Assets that utilize different stability mechanisms, such as over-collateralization and secondary liquidity pools, to track the reference price of different assets. Their first Tethered asset product, Alloy, is a US dollar-pegged stablecoin backed by their own Tether Gold token, allowing holders to gain access to dollars for day-to-day payments while maintaining gold exposure.

Before we explore the Tether ecosystem in further detail, it’s important to understand what a stablecoin is and how USDT fits into the many different types of stablecoins currently in existence.

What Is a Stablecoin?

A stablecoin is a digital token whose value is tied to another asset, like a commodity or fiat currency, to stabilize its price. By maintaining a 1:1 peg to a specific fiat currency, asset, or commodity, most stablecoins essentially act as a bridge between real-world assets and digital currencies by representing them as tokens on the blockchain. Because they tend to be pegged to relatively stable assets, stablecoins have become the most popular way for crypto users to transfer value without exposing themselves to price volatility. Moreover, they have also become a store of value for crypto users, enabling them to keep their capital on-chain even as they stay out of the market. By purchasing fiat or commodity-backed stablecoins, users sometimes also have the option of redeeming them for their real-life counterparts if they wish to do so.

Still, it’s important to recognize that not all stablecoins are fully backed by real-world assets, as some utilize a combination of on-chain assets and smart contract algorithms to protect their peg. For example, some stablecoins like DAI, crvUSD, and GHO are overcollateralized by other crypto assets, such as ETH and BTC, and have a liquidation mechanism if the value of the collateral falls too low. On the other hand, Ampleforth makes use of a rebasing mechanism that adjusts the supply of stablecoins in the market to preserve price parity with the US dollar. As such, there’s no guarantee that these stablecoins can be redeemed for their equivalent in US dollars since they are not backed by real fiat reserves in the first place.

Although the ‘stable’ part of stablecoins implies stability from being pegged to less volatile assets such as fiat currencies and precious metals, there are instances where tokens claiming to be stablecoins are pegged to more fluctuating assets. One such example is frxETH, which loosely follows the value of Ether. In the same vein, one can also consider tokens pegged to commodities like oil and even uranium to be more volatile compared to the average US-dollar stablecoin. These tokens should be more accurately referred to as pegged assets.

Compared to algorithmic stablecoins, Tether simply holds the appropriate amount of reserves and issues an equivalent amount of stablecoins on-chain. As the pioneer of fiat-backed stablecoins, which has become one of the most popular ways of issuing stablecoins, let’s take a deeper look into how Tether works and how Tether Limited employs various methods to maintain the peg of its stablecoin.

How Does Tether (USDT) Work and How Does Tether (USDT) Maintain Its Peg

All of Tether’s stablecoins are backed by a basket of various assets, which are at least equal in value to the amount of stablecoins in circulation. Hence, USDT, as well as its other stablecoins, are fully collateralized by cash and cash equivalents, such as Bitcoin, precious metals, corporate loans, and other investments. Tether’s reserve reports are published on a quarterly basis and are made available on their Transparency page, which also details the breakdown of their holdings. Additionally, the number of stablecoins in circulation is updated on a daily basis, and users can check the number of tokens that have been authorized and issued natively across Tether’s supported blockchains and bridges. 

Tether tokens can be created on a specific network by having multiple authorized individuals sign and broadcast the transaction to generate them. These new tokens are considered as ‘authorized, but not issued’, which means that the tokens are stored in Tether’s treasury but are not considered circulating until a customer acquires the tokens directly using fiat. The reason for doing so is to ensure the security of the issuance process by limiting the number of times that Tether signers need to access their private keys, thereby lowering the risks of exposure.

Upon purchase, the Tether tokens can then be issued to the user based on the following steps:

1.  A user with a verified Tether account that has undergone KYC deposits fiat currency into Tether’s real-world accounts.

2. Tether tokens are then issued from the Tether treasury to the user’s specified wallet address. The value of tokens received will be slightly less than the amount of funds deposited by the user after deducting fees.

3. The users can then store or transfer tokens to other wallets or use them to interact with dApps on their preferred network.

Besides handling the issuance of various stablecoins, Tether is also responsible for maintaining the peg of the stablecoins to their matching currencies. The total sum of circulating USDT and other stablecoins is considered to be fully backed when it is less than or equal to Tether’s reserves. Thus, before the entity can authorize the issuance of more stablecoins, it needs to ensure that there are sufficient reserve assets that are equal in value to the full authorized amount in order to retain USDT’s peg at one US dollar.

Subsequently, when holders choose to redeem their USDT for fiat currencies held by Tether, the corresponding tokens are burnt, reducing the amount of circulating USDT tokens on that blockchain. Alternatively, the tokens can also be removed from the circulating supply and held in the treasury for future issuance. On rare occasions, Tether also has the power to blacklist and burn tokens from the wallets of exploiters and bad actors in accordance with demands from governments, law enforcement agencies, and other authorities.

Advantages of USDT

While volatility is arguably one of the key aspects of the crypto industry, there are many ways that stablecoins can offer benefits to users as a stable form of currency that can be used to conduct trades or payments. Tether is no different, offering unique features and advantages that allow crypto users to weather through the ups and downs of the ever-changing crypto market. In this section, we will take a deeper look into the core strengths of USDT that have helped to solidify its position as the largest stablecoin in the market.

Widespread Adoption and Deep Liquidity

As Tether’s popularity continues to grow, USDT is now widely accepted by a wide range of centralized exchanges that support the stablecoin across multiple chains. This makes it easier for users to move their funds across different chains using USDT and exchanges without having to convert them to other assets. 

The integration of USDT in decentralized applications, such as lending platforms, adds further utility to USDT as a more stable form of collateral. Users holding USDT may choose to deposit them as collateral to create leveraged positions or even temporarily lend out their stablecoins to borrowers.

Beyond that, the large amounts of USDT in circulation across various networks make Tether one of the most liquid crypto assets on the market. CEXes and DEXes take advantage of this by pairing USDT against a wide range of crypto tokens, enabling users to trade from one pair to another easily. The advantages are more apparent in DEXs, where a token’s liquidity could be fragmented across different pools that are paired with different base assets. However, because pools paired against USDT are so prevalent, DEXes can work through multiple hops to complete more obscure swaps, albeit with some slippage.

Stability and Robust Reserves

Although there are many stablecoins in the market, few have the same level of access to high-quality reserves that are needed to back their tokens and maintain their peg. Tether’s robust reserves, which mostly consist of US Treasury bills, have proven to be highly stable and liquid, providing confidence that Tether can maintain its dollar peg and service any redemption requests. Tether has also added gold and Bitcoin to its list of underlying assets, with the rationale of hedging against inflation. The market value of these reserves is then recorded and published in quarterly reports, which are publicly available on their website.

Be that as it may, Tether’s holdings, which are in line with other centralized stablecoin providers such as Circle, have proven to be more unpredictable in the past few years, mainly due to volatility in bond markets. More recently, the spike in short-term Treasury yields, as well the failures of several US banks in 2023, have reignited fears surrounding centralized stablecoins that park their reserves in such instruments, which are, in turn, custodied by these banking institutions. While Tether escaped unscathed from these bank failures, their closest rival, Circle’s USDC, was not so fortunate, having had deposits at Silicon Valley Bank. While they were eventually able to recover their reserves, USDC depegged from $1 to as low as $0.88 during the events before recovering.

Although USDT has depegged on different occasions throughout its lifetime, these incidents were largely temporary, and the stablecoin has remained fairly stable for close to 10 years. Through these periods of depeg, Tether Limited has thus far always been able to service full redemptions. Nonetheless, the shift to US Treasury Bonds as the main reserve instrument has also been a windfall for Tether Limited, especially after the Fed started hiking interest rates, as the yield from these bonds became its main source of revenue. 

An Alternative to the Traditional Financial System

For the more privileged crypto users, stablecoins are often perceived to be merely instruments for achieving portfolio stability, but they mean more than that to users with little to no access to traditional bank accounts or payment rails to participate in the global economy. 

For emerging markets, in particular, stablecoins pegged to more resilient assets, such as USDT and XAUT, have surged in popularity as their country’s fiat currencies succumb to hyperinflation. Tether addresses these hurdles by offering a simpler and safer way of storing different types of fiat currencies while also accessing DeFi protocols, which can replicate the core functions that a traditional banking system offers.

Tether allows users worldwide to make payments and transfer funds privately through their crypto wallets without revealing any information about their identity or location. Additionally, blockchains such as Tron allow these transactions to be made with little added cost, helping users avoid the high transfer and remittance fees that are often associated with regions that lack access to financial services.

The aforementioned integration to DeFi protocols also gives USDT holders exposure to potential yield and even borrowing and lending activities. As a token that is heavily supported by a plethora of protocols, users can experiment and learn to interact with these protocols to create their own self-custodied fund or savings account. For instance, they can participate in liquidity provision on DEXs and lending markets to earn yield in a similar fashion to traditional bank deposits without exposing themselves to price volatility that is inherent to other cryptocurrencies.

Risks of Tether: Is USDT Safe?

Even though USDT has clearly solidified its position at the top of the stablecoin market for now, it hasn’t always been smooth sailing. Over its lifetime, the firm has faced criticisms over the transparency of its reserves and, by extension, its ability to service redemptions, leading to fear and doubt over the stablecoin to maintain its peg. While Tether has consistently published Reserve Reports that are audited by independent third-party auditors, critics have pointed out that these reports do not constitute an actual audit of the reserves and overall financial standing of the company.

Unfortunately, there have been instances in Tether’s history where it has failed to maintain full reserves for all issued USDT. In 2021, the company was fined by regulators for holding full reserves for just over a quarter of the days between 2016 and 2018 and was unable to provide proper audit reports for the reserves. However, it does seem like Tether has improved its reserve management over the years, having weathered the turmoil of the 2022 crypto collapse relatively well. The company successfully fulfilled over $15B in redemption requests, approximately 20% of USDT’s total supply at the time. Its reserves have also become increasingly diversified, as the company now finds itself in a surplus situation. The reserves now include higher-risk investments such as corporate bonds and secured loans to other entities, which have also raised alarm amongst its critics. 

Moreover, there are further concerns regarding the commingling of funds between Tether and the popular crypto exchange Bitfinex. Since both platforms were previously subsidiaries under the same parent company, iFinex, there has been speculation that Tether’s funds could have been secretly utilized by Bitfinex and vice versa. In 2019, it was alleged that $700M worth of funds from Tether’s reserves were used to cover up $850M of losses incurred by the exchange. This adds a layer of uncertainty as to whether there are adequate reserves currently backing the stablecoins in circulation, especially if the movement of funds between the two establishments is not disclosed to holders.

Tether has also been utilized by terrorists, cyber-attacks, and other entities involved in criminal acts. To combat the usage of USDT for illicit activity, Tether Limited has mechanisms in the stablecoin’s smart contract that allows them to blacklist wallets as requested by law enforcement. The USDT in blacklisted wallets is frozen and prevents the stablecoins from being transferred to other addresses. Tether’s centralized nature allows it to comply with government regulations and intervention, but unfortunately, at the same time, it stands at odds with crypto’s ethos of freedom to transact.

That said, the risks and dangers that have often been highlighted about USDT are not unique and apply to a good majority of stablecoins out there. Over the past few years, Tether has continuously sought to provide higher levels of transparency and has made reparations for transgressing the law in the past. Given the convenience that USDT provides to the average crypto user, it’s no surprise that most of them are willing to overlook these risks in exchange for a stable token that is suitable for daily transactions.

History of Tether (USDT)

Well before Ethereum was launched, J.R. Willett proposed the concept of issuing different crypto assets on the Bitcoin network in 2012. His idea was later implemented in the cryptocurrency project Mastercoin, which sought to build a secondary layer for crypto assets on top of the Bitcoin blockchain. The project was guided by the Mastercoin Foundation, which was later renamed the Omni Foundation in 2015. The architecture of the Mastercoin protocol would actually serve as the technological foundation for Tether’s creation. One of the foundation’s original members, Brock Pearce, would go on to become a co-founder of Tether.

Originally launched as Realcoin in July 2014, the project began issuing its first stablecoins on Bitcoin in October 2014 through the Mastercoin protocol. By utilizing Bitcoin’s existing infrastructure, Realcoin allowed users to transfer funds and execute smart contracts in a permissionless manner with an asset that claims to be backed 1:1 to US dollars. By partnering with financial institutions, banks, digital asset exchanges, and even ATM providers, these avenues became the gateway for trading and redeeming Realcoin.

In November 2014, the project rebranded into what we know today as Tether in an effort to distinguish itself as a service for providing digital dollars, as opposed to being just another altcoin or blockchain. Tether entered private beta with the launch of three ‘Tether+’ stablecoins –  USTether (US+), EuroTether (EU+), and YenTether (JP+), representing US dollars, euros, and Japanese yen, respectively. According to the firm, each stablecoin was fully backed by its underlying currency and can be redeemed at any time. Back then, this was a bold declaration that quickly attracted scrutiny by the community. The firm’s official entity, Tether Limited, was incorporated in the British Virgin Islands and claimed to have offices in Switzerland, but revealed no additional details and had not undergone an independent audit – a perfect storm for speculation and conspiracy.

Shortly after, in January 2015, Bitfinex became the first centralized exchange to integrate Tether trading on its platform. However, this move merely fueled speculation about the relationship between the two organizations. Although the two firms claimed that they were not related, documents leaked in 2017 revealed that Bitfinex officials were responsible for setting up Tether Holdings Limited in 2014, and the CEO of both firms at the time was the same person, Jan Ludovicus van der Velde. Be that as it may, this did not stop the stablecoin from growing exponentially over the next 2 years, increasing its market cap by more than 33x to $10M at the end of 2016. Tether would continue to operate smoothly and successfully, maintaining its peg before facing its first major depeg event in 2017.

For a time, Tether processed US dollar transactions, which included redemptions, through Taiwanese banks, which relayed the funds to Wells Fargo, allowing the money to be sent to their counterparts outside of Taiwan. The flow of money came to a grinding halt in April 2017 after Tether announced that these international transfers had now been blocked. Upon the news, the price of USDT depegged to a low of $0.92. This event would only be the first in a series of depegs and mishaps that Tether would endure over the next 12 months. In November 2017, over $31M worth of USDT was stolen from its Treasury. In response, Tether performed an emergency hard fork by releasing a new version of its Omni Core software, effectively preventing the stolen USDT from being transferred. Almost a year later, in October 2018, the perceived insolvency of the associated Bitfinex exchange resulted in the stablecoin depegging to $0.88. Since then, Tether has remained relatively stable but saw several minor depegs stemming from the collapse of Terra and FTX in 2022.

The growth of Tether also brought significant revenue for its issuing firm, Tether Limited. As Tether is primarily backed by US money market instruments, these generate yield, particularly as the Federal Reserve started hiking rates post-Covid. In May 2023, Tether announced its plan to allocate up to 15% of its profits to purchasing Bitcoin quarterly as part of its strategy to move away from cash-based assets, a reasonable move given the increase in volatility of US Treasury bonds during the year. The firm had already purchased its first tranche of Bitcoin in September 2022 and is currently holding more than $5B in Bitcoin as of its latest attestation report. In the same month, Tether also announced their plans to build a new green Bitcoin mining operation in Uruguay. Following the appointment of former CTO Paolo Ardoino as the new CEO of Tether in October 2023, the firm doubled down on its efforts in the Bitcoin mining space with plans to allocate up to $500M to become one of the world’s largest miners.

Despite the platform’s exponential growth thus far, its expansion has not always been straightforward, as Tether has since deprecated YenTether and suspended support on its original network, Omni Layer, along with Kusama, Bitcoin Cash, EOS, and Algorand. Currently, Tether is working towards becoming more than just a stablecoin issuer by broadening its influence across the digital assets space. As part of its expansion strategy, Tether chose to restructure its company in April 2024 and has since reorganized into four different divisions – Tether Data, Tether Finance, Tether Power, and Tether Edu.

How to Buy USDT 

Purchasing USDT is no different from purchasing any other token, as users can acquire it by swapping for USDT through various platforms, including centralized exchanges such as Binance and OKX or decentralized exchanges and aggregators such as Uniswap and Jupiter. Alternatively, large institutions or high net-worth individuals looking to convert a substantial amount of fiat currency into USDT can opt for the direct route of setting up a Tether account and on-ramp directly through Tether.

Yet, it’s important to reiterate that there are different versions of USDT across each network, each with its own unique smart contract address. While these versions are usually aggregated as a single token on centralized exchanges, users swapping for USDT on decentralized applications or transferring it from a self-custodial wallet will need to ensure that they are interacting with tokens that have the correct contract address on that particular network. Users can verify the contract addresses of USDT issued natively on Tether’s supported networks through their Knowledge Base, or on Tether’s coin page on CoinGecko.

 In addition to being used for payments or in trading, USDT can be staked as liquidity on lending platforms and exchanges to earn yield. Many centralized exchanges now offer Earn products that allow users to deposit USDT for a variable or fixed period in exchange for daily interest payments. Some products, such as Aave’s aUSDT, allow you to convert your tokens into a liquid yield-bearing stablecoin, where returns are generated from the interest paid by users who borrow USDT.

You can also add USDT to your crypto wallets, like MetaMask, by entering the correct token address for your selected network. 

Tether (USDT) vs. Bitcoin

On the surface, it would seem as if Tether and Bitcoin are similar in the sense of functioning as electronic cash, these two assets are anything but alike. 

Bitcoin was conceived as a completely decentralized, censorship-resistant form of money with a fixed total supply and predictable inflation. Tether, which mirrors the US dollar on-chain, is obviously impacted by the fiscal and monetary policies of the US Government and Federal Reserve. In addition, all Tether is issued by Tether Limited, which can unilaterally blacklist addresses and freeze the tokens. Bitcoin, at least at this point in time, is much more volatile price-wise relative to the US dollar and, by extension, Tether. 

That said, both tokens are immensely important in the crypto space and, as such, are widely adopted and supported by most crypto platforms as collateral or as a medium of exchange. Even though crypto purists would consider Bitcoin as ‘hard money’ that is free from government interference, its volatility has made it challenging for more businesses and traditional institutions to accept it as a payment method. The introduction of Tether’s stablecoins has helped to bridge the gap between commerce and cryptocurrency, acting as the gateway for platforms to start accepting stablecoins and, eventually, different types of crypto assets.

USDT vs. USDC vs. DAI

As one of the first stablecoins to be released in the crypto space, it’s a remarkable achievement for USDT to maintain its place at the top after 10 long years, even with a plethora of new stablecoin projects that are constantly being introduced into the market. There’s no shortage of competitors looking to challenge USDT’s throne; USDC and DAI remain its closest competitors. Barring the exception of some temporary depegs, these three stablecoins have all found varying degrees of success in maintaining the peg to 1 US dollar, with each of them operating on different types of collateral, mechanisms, and supported networks.

Despite being the second and third largest stablecoins by market cap, respectively, USDC and DAI today combined still only make up 33.6% of the market cap of USDT.  However, at one point, USDC had as much as 84% of USDT’s market share, though it has since declined significantly since the 2023 Silvergate / Signature Bank banking crisis. Despite the higher amount of stablecoins in circulation,  USDT is supported across only 10 different networks, mainly focusing on Layer 1s, while USDC is available across 16 chains, including Ethereum Layer 2s such as Arbitrum and zkSync. Meanwhile, DAI recently went multi-chain just 2 years ago, offering the official version of DAI, known as ‘canonical DAI’, across Ethereum and its Layer 2s. 

While USDT and USDC are mostly backed by the same assets, USDT incorporates some riskier instruments with corporate bonds and loans, sprinkled in with alternative assets such as precious metals and Bitcoin. Conversely, DAI used to be largely backed by Ether as its primary collateral. The issuing platform, Maker, later transformed DAI into a multi-collateral asset, accepting various crypto assets such as Bitcoin, other stablecoins, and even private loans from real-world institutions. In fact, more than 52% of the DAI supply is backed by RWA loans.

As a decentralized stablecoin, the risk parameters regarding the issuance of DAI and the addition of new collateral types are governed by MakerDAO, consisting of holders of the protocol governance token MKR. MKR holders can vote on changes to be made to the protocol, whereas holders of centralized stablecoins such as USDT and USDC have no such governance powers. Since these stablecoins are controlled by central entities, it is at their discretion to dictate the stablecoin’s future and direction. As we’ve mentioned before, this also allows the entities to exert control in blocking the stablecoins from being transacted even though they are held by sovereign individuals. On the other hand, DAI is completely censorship-resistant. 

Last but not least, fees are another aspect that further differentiates these stablecoins from one another. Although minting fees for USDT and USDC may seem very low at 0.1% and 0%, respectively, the process requires the creation of a whitelisted account that has undergone the appropriate KYC and AML procedures. Additionally, the minimum fees and requirements for redeeming your USDT for dollars are generally beyond the reach of the average user. On the contrary, DAI fees are variable and can be adjusted by the DAO based on the supply and demand for DAI. While the minting and redemptions fees right now are much higher at 8%, it is a price that users are willing to pay for the ability to permissionlessly deposit any amount of crypto assets to mint DAI without giving away their identity. Users can choose to deposit their idle or long-term crypto holdings for DAI in order to retain exposure to them while gaining access to a stable form of currency for other purposes.

Final Thoughts

In a market that has become synonymous with erratic price action and high volatility, the very notion of a stablecoin might seem out of place. Yet, this sort of environment is exactly why stablecoins such as USDT have become an integral part of the crypto ecosystem. Besides acting as a key driver for adoption among new investors who are looking to onboard into crypto, stablecoins offer a safe haven for long-term participants, helping to minimize exposure to volatility and retain their capital on-chain as they continue on their crypto investing journey.

Despite the lingering skepticism regarding the transparency and stability of USDT,  its usage has evolved beyond just the crypto space, becoming a legitimate form of payment in countries where their fiat currencies have proven to be as volatile as crypto. In a way, it has become a universal US dollar-denominated instrument that transcends borders, allowing users to conduct transactions with each other in a secure and private manner. However, in the wrong hands, the anonymous transactions that USDT facilitates open the door for money laundering and other illegal activities to take place.

Over the years, USDT and other types of stablecoins have often appeared in the news for all the wrong reasons, drawing the attention of governments and law enforcement agencies worldwide. As a result, many countries are now enacting new sets of legislation for stablecoins, with further regulation to avoid any issues with compliance and fraud. Even though this may seem like a step backward for the stablecoin industry, these checks and balances are crucial in protecting investors from the likes of another collapse that may be even more devastating than Terra.

References:

1. https://www.investopedia.com/terms/t/tether-usdt.asp

2. https://tether.to/en/transparency/

3. https://cryptochainuni.com/wp-content/uploads/Mastercoin-2nd-Bitcoin-Whitepaper.pdf

4. https://tether.to/en/fees/

5. https://tether.to/en/why-tether

6. https://www.coindesk.com/markets/2014/11/20/realcoin-rebrands-as-tether-to-avoid-altcoin-association/

7. https://tether.to/en/supported-protocols