What is Tether (USDT): Leading the pack, despite increased competition

Over Tether’s chequered lifespan, the stablecoin has remained an essential cog in the crypto machine


USDT donations to Ukraine

Tether (USDT) became a major conduit for donations to the Ukrainian resistance after Russian president Vladimir Putin’s internationally condemned invasion of the country, which continues to rage at the time of writing.

Millions in USDT and ether (ETH) began pouring in from people across the world following a Tweet from the official account of Ukraine.

As Russia’s invasion commenced, Tether’s price moved above its $1 peg on Kuna, Ukraine’s popular cryptocurrency exchange hitting $1.13 on 28 February, 13% more than its natural value. However, trading values on other major exchanges including Currency.com remain stable.

The Tether stablecoin: facts and figures

What is Tether (USDT) and what is Tether (USDT) coin used for? Not only is USDT the largest stablecoin in the world by a margin of more than $25bn, Tether is also the third-largest cryptocurrency by market capitalisation. Its valuation of $79.6bn sits behind only ETH’s $315.5bn and bitcoin’s $727bn.

Circulating volume of the Tether cryptocurrency is contingent on user demand. One USDT is minted for each US dollar exchanged. Upon redemption, every USDT coin is burned, therefore preventing circulation from being artificially inflated.

As a stablecoin, each USDT coin is pegged to the dollar, allowing users to transact across the blockchain without the inherent volatility associated with digital currencies. Tether’s ground-breaking utility proved immensely popular in the digital finance (DeFi) space, pre-empting a wave of competitors in the stablecoin market after its launch in July 2014 (when it was known as Realcoin).

As of February 2022, the entire stablecoin market was valued at more than $182.8bn, with major alternatives to the Tether cryptocurrency including USD Coin, Binance Coin, Terra Dai and Pax Dollar. Despite increasing competition, Tether remains by far the most prominent stablecoin to date, and has become an essential cog in the cryptocurrency machine.

After becoming a primary digital asset for facilitating donations to the Ukrainian resistance, USDT’s trading volume shot up. A 40% day-on-day rise to $61.67bn was witnessed on 28 February, more than 77% of market capitalisation.

Tether’s controversy: A recap

Currency.com would like to point out that these controversies should not deter anyone from donating to Ukrainian organisations currently accepting USDT. As an exchange of value, USDT remains as secure as any other digital asset.

As the world’s largest stablecoin, USDT has been at the centre of the crypto regulation debate which hit its stride in 2021. The ongoing controversy surrounds the whereabouts of Tether’s reserves, which theoretically should match the circulating volume at any given moment ($79.6bn in a recent high).

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The problem was that Tether (USDT) was wildly misrepresenting the composition of these reserves. Rather than USDT being backed by genuine fiat, a large proportion of these reserves were, and still are, backed by commercial paper, shorthand for unsecured, short-term debt.

Breakdown of Tether’s reserves – Source: tether.to
Slightly less than 5% of Tether’s reserves are backed by secured loans – Source: tether.to

After these revelations, Tether increased its transparency. As shown above, 52.5% of cash and cash equivalents remains in commercial paper, while only 12.4% remains in actual cash and bank deposits. Tether is reportedly taking steps to reduce its reliance on commercial paper, citing a 21% decrease in holdings over the last quarter.

The Caymans-based Tether still remains a largely unregulated entity. Dan Burnstein, general counsel and chief compliance officer of the regulated stablecoin Paxos, said in a recent opinion piece: “The issuers of these tokens are prioritising yield for themselves over stability and security of the reserves. Because neither token [referring to USDT and USD Coin] is regulated, the issuers are self-policing.”

Tether’s reserves, or lack thereof, caught the interest of the New York Attorney-General, Leticia James, who ordered the cessation of activity by the company in New York State and a fine of $18.5m on its parent company, iFinex (which also owns the Bitfinex exchange). In a press release, James stated: “Bitfinex and Tether recklessly and unlawfully covered up massive financial losses to keep their scheme going and protect their bottom lines.”

Tether’s relationship with Bitfinex remains an ongoing concern. In January 2022, CoinDesk intervened in legal proceedings between Tether and New York State relating to the release of documents obtained during the the New York Attorney-General’s investigation into Tether and Bitfinex. CoinDesk’s argument that full disclosure is in the public interest was contested by Tether, which said: “CoinDesk’s reckless campaign to expose the companies’ proprietary business would needlessly risk harm to the companies’ competitive position and compliance controls.”

Who uses Tether (USDT)?

Tether plays an important role on the centralised exchanges (CEXs). How does Tether (USDT) work in this regard? USDT is often the most favourable trading pair against other digital currencies. Since large liquidity pools are required to facilitate these swaps, CEXs comprise the majority of top holders of USDT’s Ethereum-based tokens; Binance, OKEx, KuCoin and Kraken are all in the top ten holders.

List of top-ten tether holders on Ethereum – Source: etherscan.io
The Tether treasury holds 2.43% of circulating supply of Ethereum-based tokens – Source: etherscan.io

In order to make cross-chain swaps possible, large quantities of USDT are also held in smart contract bridges for the Avalanche, HECO Chain and Polygon blockchains. Tether’s treasury is the sixth-largest holder of USDT.

For merchants wanting to implement Tether’s services into their businesses, a two-step verification and a $150 non-refundable verification fee is required.


There are currently 79.58 billion USDT in circulation across multiple blockchains. Ethereum is the primary blockchain, with Avalanche, Polygon, HECO Chain, BNB Chain and others also supporting USDT. Circulation is largely contingent on user demand

The Caymans-based iFinex is the parent company of both Tether and crypto exchange Bitfinex. JL Van de Velde is the chief executive of both entities.

Tether (USDT) has faced numerous controversies surrounding the composition of its reserves, culminating in an $18.5m fine and a cessation of operations in New York State imposed by the New York Attorney General. However, Tether is a legal digital currency in all approved jurisdictions.

Further reading

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