USDT Tether

What is Tether?

Tether (USDT) is a cryptocurrency with a value meant to mirror the value of the U.S. dollar. The idea was to create a stable cryptocurrency that can be used like digital dollars. Coins that serve this purpose of being a stable dollar substitute are called “stable coins.” Tether is the most popular stable coin and even acts as a dollar replacement on many popular exchanges! According to their site, Tether converts cash into digital currency, to anchor or “tether” the value of the coin to the price of national currencies like the US dollar, the Euro, and the Yen. Like other cryptos it uses blockchain. Unlike other cryptos, it is [according to the official Tether site] “100% backed by USD” (USD is held in reserve). The primary use of Tether is that it offers some stability to the otherwise volatile crypto space and offers liquidity to exchanges who can’t deal in dollars and with banks (for example to the sometimes controversial but leading exchange Bitfinex).

The digital coins are issued by a company called Tether Limited that is governed by the laws of the British Virgin Islands, according to the legal part of its website. It is incorporated in Hong Kong. It has emerged that Jan Ludovicus van der Velde is the CEO of cryptocurrency exchange Bitfinex, which has been accused of being involved in the price manipulation of bitcoin, as well as tether. Many people trading on exchanges, including Bitfinex, will use tether to buy other cryptocurrencies like bitcoin. Tether Limited argues that using this method to buy virtual currencies allows users to move fiat in and out of an exchange more quickly and cheaply. Also, exchanges typically have rocky relationships with banks, and using Tether is a way to circumvent that.

USDT is fairly simple to use. Once on exchanges like Poloniex or Bittrex, it can be used to purchase Bitcoin and other cryptocurrencies. It can be easily transferred from an exchange to any Omni Layer enabled wallet. Tether has no transaction fees, although external wallets and exchanges may charge one. In order to convert USDT to USD and vise versa through the Tether.to Platform, users must pay a small fee. Buying and selling Tether for Bitcoin can be done through a variety of exchanges like the ones mentioned previously or through the Tether.to platform, which also allows the conversion between USD to and from your bank account.

Vladislav Ch

21 April 2021
Updated 12 March

467 14

Tether

USDT (Tether) is the largest stablecoin by market capitalization, used to provide liquidity in the cryptocurrency sector. It is backed by reserves from the issuer Tether Limited, but the issue of its transparency remains a topic of debate.

Key Metrics:

• Market Capitalization: $100+ billion
• Stablecoin Market Share: ~70%
• Trading Volume (24h): $50-100 billion
• Peg: 1 USDT = 1 USD
• Issuer: Tether Limited

USDT plays a critically important role in the crypto market, acting as a liquid instrument for trading, hedging, and capital movement.

Financial Reserves and Backing

Tether claims that every USDT is backed by reserves. However, the structure of these reserves has changed over the years.

Reserve Structure (according to Tether's latest report)

• Short-term U.S. Treasury Bonds: ~80%
• Cash and Deposits: ~10%
• Other Assets (loans, corporate bonds, crypto assets): ~10%

Tether asserts that its assets exceed its liabilities, but real audits have not been conducted. The company publishes attestations from accounting firms, but these are not full audits.

Risks of Reserves:

• The presence of credit assets creates potential liquidity issues.
• The lack of clear regulatory oversight raises doubts about the reliability of reporting.
• Reporting is confirmed by affiliated firms, which raises questions about the independence of audits.

Legal Status and Regulation

Tether Limited is registered in the British Virgin Islands, giving the company flexibility in asset management but reducing regulatory oversight.

Major Legal Disputes

• 2021: The CFTC fined Tether $41 million for false statements regarding the full backing of USDT by cash.
• 2023: The U.S. Department of Justice investigated possible manipulation by Tether in banking operations.
• 2024: European and Asian regulators intensified scrutiny of USDT's use in money laundering.

Tether has repeatedly stated its willingness to cooperate with authorities, but has not obtained a banking license in the U.S., unlike its competitor USDC (Circle).

The Role of USDT in the Crypto Industry

USDT remains the most liquid and widely used stablecoin, despite regulatory risks.

Main Use Cases

• Cryptocurrency Exchanges: USDT accounts for up to 70% of trading pairs on centralized platforms.
• Decentralized Finance (DeFi): used in lending, farming, and liquidity.
• Transfers and Settlements: low fees make USDT popular in countries with volatile economies.

Despite its dominant position, the demand for more transparent alternatives (such as USDC and DAI) is growing.

Investor Risks

Main Threats

• Liquidity Risk: during a crisis, there may be delays in redeeming USDT for fiat.
• Regulatory Pressure: bans and investigations could lead to blocking or sanctions against the issuer.
• Transparency: the lack of an audit makes it difficult to assess the real value of backing.
• Competition: stable alternatives (USDC, PYUSD) could displace USDT from the market.

Conclusion

USDT remains a key element of the crypto industry, but its transparency and reliability are in question. Investors should consider regulatory and liquidity risks and look into more transparent alternatives for long-term capital storage.