Tether (USDT)
Tether (USDT) is a cryptocurrency stablecoin pegged 1:1 to the U.S. dollar launched by the company Tether Limited Inc. in 2014. As of July 2022, Tether Limited has minted the USDT stablecoin on ten protocols and blockchains. Tether Limited is owned by Hong Kong-based company iFinex, which also owns Bitfinex. [1][2][3]
Overview (USDT)
Tether (USDT or USD₮) is a cryptocurrency designed to maintain a stable value by pegging it to the value of a fiat currency, such as the US Dollar. Each USDT token is intended to be equivalent to one US Dollar, providing a stable and predictable value compared to more volatile cryptocurrencies like Bitcoin or Ethereum.
Tether was issued on the Bitcoin blockchain through the Omni Layer Protocol. Each unit of Tether is said to be backed by actual assets in the Tether Limited reserve and may be redeemed via its platform. The primary objective is to facilitate transactions between cryptocurrency exchanges with a rate fixed to the United States dollar allowing traders to take advantage of high-speed arbitrage opportunities without resorting to slow bank wires.[6]
Tether is the first stablecoin to be created and the most popular stablecoin used in the cryptocurrency ecosystem. Tether Limited attaches the value of a coin to the price of fiat currencies such as the US dollar, Euro, and Yen.[7]
According to Tether Limited, the tether is fully reserved i.e. the total number of tethers in circulation is less than or equal to the remaining balance of fiat currency in its reserve. Exchanges have been the primary users of USDT as an alternative to fiat currencies, which minimizes or eliminates the need to maintain external banking relations. Some of the notable exchanges that utilize Tether include Bitfinex, Binance, Coinbase, Kraken, Huobi, Poloniex, Liquid.io, and OKX.[7]
Overview (Tether Limited)
Early Beginnings (2014-2015)
Tether, initially known as Realcoin, was founded in July 2014 by Brock Pierce, Reeve Collins, and Craig Sellars. It was later rebranded to USTether and then to USDT in Novem 2014. USDT which was initially built on the Bitcoin blockchain using the Omni platform is now supported on multi-chains including the Ethereum, TRON, EOS, Algorand, Solana, OMG Network, Polkadot, and Polygon blockchains.
Tether was created as an attempt to solve two major issues with existing cryptocurrencies: high volatility and convertibility between fiat currencies and cryptocurrencies. Tether developed a cryptocurrency that is fully backed 1:1 by bank deposits of U.S. dollars to overcome these alleged difficulties. While Tether used the Omni layer to represent USDT tokens on Bitcoin, ERC-20 tokens were used to represent USDT tokens on Ethereum. While the tokens themselves operated in a decentralized network, Hong Kong-based Tether Ltd was solely responsible for creating and redeeming tokens as well as maintaining the 1:1 deposit backing.[9]
Further Development (2018-2024)
In November 2018, Tether announced Deltec as its new banking partner to quell rumors about its solvency raised by the associated crypto exchange, Bitfinex.[10]
In March 2019, Tether updated its disclosure statement and stated that its tokens are no longer fully backed by deposits in U.S. dollars. Instead, Tether is now fully backed by reserves, which include conventional currency, cash equivalents, and occasionally other assets and receivables from loans that Tether has given to third parties, including perhaps connected organizations. [11]
In October 2023, Paolo Ardoino, former chief technology officer for Tether, was promoted to the position of CEO for the company. He will lead the company starting in December 2023, succeeding Jean-Louis van der Velde. [36][41]
On June 24, 2024, Tether announced plans to immediately discontinue support for its USD₮ token on the EOS and Algorand blockchains. This decision followed an extensive review of these platforms, assessing factors such as security architecture, community engagement, and overall utility. [46]
"We will continue to support the protocols and chains that the community finds useful and encourage the community to expand the use cases of USD₮ on every protocol." - the team wrote[47]
Tether Enters the Latin American Market
In May 2022, Tether announced the launch of MXNT, a new stablecoin backed by the Mexican peso. Following earlier launches of its USDT, EURT, and CNHT stablecoins, tied to the U.S. dollar, euro, and Chinese yuan respectively, the move signified its entrance into the Latin American market. MXNT was initially made accessible on the Ethereum, Polygon, and TRON blockchains.[12]
According to the firm’s former CTO, Paolo Ardoino, the decision to enter Latin America was motivated by the region's rising Bitcoin adoption. Notably, a study by bitcoin payments firm Triple A found that 40% of Mexican businesses were interested in implementing cryptocurrencies in some capacity, with 71% of those in the segment concentrating especially on doing so. [12]
Tether named Mexico a “prime location” for the next Latin American crypto hub. To assess the viability of future fiat-pegged currencies in the region, the launch of MXNT is said to be used to onboard as many new users as possible inside the Latin American market. [12]
In May 2022, Tether's price momentarily dropped to $0.96 as a result of the depreciation of a different stablecoin, TerraUSD (UST), issued by an entity unrelated to Tether or BitFinex. Tether stated it was continuing to satisfy redemption requests that surpassed 2 billion tokens on May 12 at a ratio of 1 token to 1 U.S. dollar. The price of Tether tokens rapidly recovered to more than $0.99.[13]
Tether Mints $1B USDT
On December 25, 2023, the blockchain tracking platform Whale Alert reported that the Tether Treasury had minted $1 billion of its stablecoin, USDT. CEO Paul Ardoino responded to the thread on X saying that the transfer was an “inventory replenishment” on the Ethereum Network. [43]
"PSA: 1B USDt inventory replenish on Ethereum Network. Note this is an authorized but not issued transaction, meaning that this amount will be used as inventory for next period issuance requests and chain swaps" - Ardoino wrote. [44]
Inventory replenishment is the process of restocking goods to meet customer demand without accumulating excess stock. It involves forecasting demand, placing orders, and considering factors like lead time and safety stock to maintain optimal inventory levels. [45]
Tether notes that its inventory replenishment is the process of creating new USDT that is stored in its treasury inventory as “authorized but not issued” USDT. [43]
"These tokens are not part of the total market capitalization of USD₮, as they have not been issued or released into circulation yet,” the company states on its website.[45]
Integrations
On May 27, 2022, Tether Operations Limited announced the launch of Tether tokens(USD₮) on Polygon, a leading blockchain development platform. The addition of Tether to the Polygon ecosystem offers a new stablecoin option for more than 8,000 teams building on Polygon.[14]
On June 9, 2022, Tether Operations Limited announced the launch of Tether tokens(USD₮) on Tezos, a pioneering upgradable Proof-of-Stake blockchain. The addition of USD₮ to Tezos demonstrates its growing momentum as a thriving Proof-of-Stake blockchain of choice for brands and projects looking to build the Web3 revolution.[15]
On September 12, 2022, Tether launched Tether tokens pegged to the U.S. dollar on the NEAR Network, a smart contract blockchain designed to provide the ideal environment for DApps which is enabled by its unique scaling solution. [16]
On September 23, 2022, Tether announced the launch of Tether tokens(USD₮) on Polkadot, a decentralized, open-source blockchain platform. The addition of Tether to the Polkadot ecosystem is to increase its presence in decentralized ecosystems.[17]
On October 20, 2022, Tether Operations Limited announced SmartPay's launch plans of tether tokens (USD₮) in over 24,000 ATMs across Brazil.[18]
On December 26, 2022, Tether Operations Limited announced the addition of its offshore Chinese Yuan (CNH₮) to the Tron blockchain. At launch, Bitfinex was the first exchange to enable its users to deposit and withdraw CNH₮ using the Tron blockchain transport layer from the platform. [29]
On January 9, 2023, Tether announced that Tether Gold (XAU₮) will be listed on ICRYPEX[30], one of Turkey’s leading cryptocurrency trading platforms. With this listing, ICRYPEX users can buy and sell XAU₮, a crypto asset that represents ownership of physical gold held in a vault in Switzerland. [31]
Tether Launches Alloy
On June 17, 2024, Tether introduced a gold-backed stablecoin pegged to the U.S. dollar. It is the first tethered asset, the issuer declared. The new coin is called Alloy (aUSDT) and is mintable on the new Alloy by Tether platform. [48][49]
According to the company, Alloy will be overcollateralized by Tether Gold (XAUt) — a token that provides ownership of physical gold — but pegged to the U.S. dollar. By definition, the new token is a synthetic dollar, which is designed to mimic the value and functionality of the U.S. dollar without being directly backed by it.
"Alloy by Tether is an open platform that allows to create collateralized synthetic digital assets and will soon be part of the new Tether digital assets tokenization platform, launching later this year, Paolo Ardoino, CEO of Tether," said in an X post.[50]
The organization also mentioned that other tethered assets, including yield-bearing products, could be created on the platform. The synthetic dollar can be minted by depositing XUSDT through a smart contract and price oracles. Thus, users can make transactions with aUSDT while retaining their gold-backed Tether asset. The aUSDT token is targeted for users who want to use crypto for payments and remittances without selling their gold-backed tokens, the press release explained. [51]
aUSDT was developed by Tether subsidiaries Moon Gold and Moon Gold El Salvador. Alloy by Tether will become part of a real-world asset tokenization platform launching later this year, said Tether CEO Paolo Ardoino. [48][51]
Partnerships
Pear Credit
On October 28, 2022, Pear Credit — a peer-to-peer credit system that allows issuers to create peer-to-peer credit “tokens” was announced. Pear Credit was founded by Tether, Holepunch[34], and Synonym. It is a peer-to-peer protocol that gives credit issuers a faster, cheaper, and more scalable token format, without relying on blockchains or any global shared-state networks. [28]
“We think Pear Credit represents an easy-to-use, scalable module and flexible solution for all the companies in the world that issue credit; gift cards, rewards tokens, travel miles and stablecoins are all possible.,” said Paolo Ardoino, former CTO of Tether.
Tether x INHOPE
On January 26, 2023, Tether Operations Limited announced that they will collaborate with INHOPE[32], the leading global network combatting online Child Sexual Abuse Material (CSAM). Tether will work with INHOPE[32] to share information, facilitate conversations between stakeholders, and take action to drive bad actors out of the crypto ecosystem. Tether is the first cryptocurrency to take a stand with INHOPE[32] against CSAM. [33]
“Working alongside law enforcement, financial intelligence units, lawmakers and standard-setting bodies worldwide, Tether is committed to being a positive force in the crypto space by highlighting the risks of child exploitation and to help organise sensible risk mitigating controls in the cryptocurrency industry. We are especially interested in improving the ability of cryptocurrency businesses to identify transfers related to online CSAM marketplaces and report them to the authorities.” - said Paolo Ardoino, former CTO at Tether.[33]
Tether x Bitkub Exchange x Bitkub Academy
On December 7, 2023, Tether announced a collaboration with Thailand's crypto exchange, Bitkub Online Co., Ltd. (Bitkub Exchange). The strategic collaboration is aimed at launching a comprehensive educational program targeting the enhancement of blockchain literacy and fostering awareness regarding stablecoins, within Thailand. Together, the companies will craft educational courses, conduct awareness campaigns, introduce incentive-based learning programs, and host regular live Q&A sessions, aiming to empower Thai speakers with insights into the digital financial landscape. [42]
"We are excited about working with Bitkub to drive forward the cause of promoting blockchain literacy. With the stablecoin market rapidly expanding in Southeast Asia, it becomes imperative for communities to comprehend the technology and its diverse applications. - Paolo Ardoino, CEO of Tether, commented[42]
Tether x Chainalysis
On May 2, 2024, Tether partnered up with blockchain surveillance company Chainalysis to monitor transactions with its tokens on secondary markets. The surveillance system includes international sanctions compliance and illicit transfer detection that could be associated with activities like terrorist financing and would help Tether identify crypto wallets that could "pose risks or may be associated with illicit and/or sanctioned addresses". [52]
On July 15, Tether announced the appointment of Philip Gradwell (former chief Economist) as Head of Economics where he will be responsible for quantifying the Tether economy and communicating the ways Tether is used, to regulators and stakeholders. [53]
“I’m proud to have played a part in maturing digital assets to the point where, in Tether, there is a true economy to analyze and the data and knowledge to do so. Tether is the digital asset with the greatest adoption, which puts it at the center of the future of money, and I’m excited to use the power of data to build a common understanding of Tether’s applications,” said Philip[53]
Tether x Vietnam Blockchain
On July 9, 2024, Tether announced a strategic collaboration with the Vietnam Blockchain Association (VBA) to drive blockchain and digital assets education. This collaboration aims to educate public stakeholders on blockchain technologies through a series of conferences and workshops, fostering knowledge-sharing and capacity-building within the industry. [54]
“As a leading voice in blockchain adoption, the Vietnam Blockchain Association’s work aligns well with our mission to promote education in blockchain. We are excited to collaborate with VBA to educate about blockchain technologies as practical solutions to the unique challenges faced by Vietnamese communities,” said Paolo Ardoino, CEO of Tether. [54]
Tether x Bitnob
On May 9, 2024, Tether and Bitnob, a fintech company that enables payments into mobile money wallets and bank accounts, announced a strategic collaboration aimed at promoting financial education on Bitcoin and Stablecoins in Africa. The collaboration featured a series of educational events hosted by Bitnob at various universities across Ghana. These events provided students with a comprehensive understanding of Bitcoin and Stablecoins and their potential applications. The first event was at the University of Health and Allied Sciences in Hohoe on May 11th, 2024. [55]
Tether x National Taipei University of Technology (NTUT)
On June 19, 2024, Tether partnered with the National Taipei University of Technology (NTUT), also known as Taipei Tech to enhance blockchain and digital asset education in the region. This initiative aims to equip students with comprehensive knowledge and practical skills in cutting-edge technology, fostering a well-rounded understanding of blockchain technology, digital assets, Bitcoin, and stablecoins.[56]
“Tether’s education initiative aligns seamlessly with the visions of these universities to empower their students with the knowledge and technical skills to boost the adoption of digital assets in Taiwan,” said Paolo Ardoino, CEO of Tether.
“By focusing on comprehensive knowledge, Tether aims to work hand-in-hand with these prestigious universities to empower the next generation of blockchain professionals in the region.” [56]
Regulation
In April 2019, the New York Attorney General’s office alleged Bitfinex, who shares the same parent company as Tether of using Tether's reserves to cover up for its $850 million in losses connected to the controversial third-party payment processor known as Crypto Capital. Stuart Hoegner, general counsel for Bitfinex and Tether, filed an affidavit some days later after the NYAG's lawsuit stating that Tether was only backed by 74% cash and equivalents and the other portion was equity in iFinex.[19]
In May 2019, Bitfinex and former Tether CTO, Paolo Ardoino announced Bitfinex had successfully raised $1 billion in a token sale, which proceeds were used to cover the $850 million in potentially lost funds from Crypto Capital.[19]
Controversy/Litigation
On September 19, 2022, due to an ongoing lawsuit in New York District Court, Bitfinex and Tether (referred to in court records as B/T), were ordered to produce documents showing the backing of USDT, the outcome of which is still pending. [37]
In October 2023, the Wall Street Journal reported that Tether has been increasingly showing up in investigations tied to money laundering, terror financing, and sanctions evasion. The report alleges that Tether appears to have been used in financing Hamas, paying Chinese fentanyl suppliers, funding the North Korean nuclear program, and buying sanctioned Venezuelan oil for sanctioned Russian oligarchs. In response, the company published a blog post denying inadequate customer due diligence and screening practices and describing how they have aided governments with criminal investigations, helping freeze a total of $835 million in assets linked to the theft. [40]
On November 20, 2023, Tether reported that together with OKX it had frozen $225 million worth of its cryptocurrency which had been linked to a human trafficking group in Southeast Asia responsible for a global pig butchering scam. Tether claimed the freeze had been done at the request of the US Secret Service, and that it was its largest-ever freeze of its token. [38][39]
Legal status
According to the platform's documentation, Tether is not a legal tender currency or a financial instrument. The ownership of Tether has no contractual rights, other legal claims, or guarantees against losses. Tether Limited is not a bank and is not required to, and does not, hold its reserves at the Federal Reserve. Tether tokens are not legal tender currency and are not covered by deposit insurance.[20]
Tether Governance
Tether Limited is the sole entity capable of altering the circulating supply of USDT tokens. When users deposit fiat money into accounts run by Tether Limited, Tether issues tokens, and when users exchange tokens for deposits of fiat money in Tether banks, Tether destroys tokens. [11]
Tether uses a proof-of-reserves approach to demonstrate that reserves are present and the system is financially sound. The system is fully collateralized when the quantity of USDT in circulation equals the amount of money held in accounts managed by Tether Limited. To ensure openness and demonstrate its financial stability, Tether Limited has guaranteed to provide audits of its bank balances on its website.[11]
Other Tether-issued stablecoins are:
- Tether gold (XAUt): pegged to gold’s price
- Tether euro (EURT): pegged to the common currency of the European Union
- Tether peso (MXNT): pegged to the Mexican peso
- Tether yuan (CNHT): pegged to the offshore Chinese yuan
