What Is Tether (USDT)?
Also known as: USDT, Tether USD, Tether USDT
In short
Tether (USDT) is a centralized stablecoin issued by the company Tether that aims to maintain a 1:1 peg to the US dollar; it is widely used on cryptocurrency exchanges as a trading pair and as a dollar-denominated store of value.
Tether launched in 2014 and was first issued on the Omni Layer protocol on Bitcoin. Today USDT exists on Ethereum, Tron, Solana and many other blockchains. The mechanism is simple: Tether states that it holds equivalent assets in its reserves for every USDT in circulation; eligible customers working directly with Tether can mint USDT by depositing dollars or redeem USDT to receive dollars. The structure of the reserves is disclosed in the assurance reports (attestations) published by the company, and a significant portion consists of short-term US Treasury bills.
USDT carries an important part of the liquidity in the crypto market: on many exchanges, prices are shown in USDT terms. It is also preferred in countries experiencing high inflation for storing value in dollars and making cross-border transfers.
It also has risks. Tether is a centralized company and can freeze USDT at certain addresses. The transparency of its reserves has been a subject of debate in the past, and the company reached a settlement on this issue in 2021 with the New York Attorney General and the CFTC in the US. Because it is not issued by an authorized issuer under MiCA in the EU, some exchanges have restricted access to USDT for users in Europe.
Last updated: · This content is for information purposes only and is not investment advice.